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Question 1
In 2017, Tina gave each of her three grandchildren, Avril, Samantha and Tucker, $20,000 in cash as their birthday presents. Tina paid gift tax on the excess amounts over the annual exclusion amount. The gift tax is subtracted from the gift.
Correct
Incorrect!
Correct The gift tax is considered tax exclusive because the donee receives the property unreduced by the gift tax paid by the donor.
Incorrect! The gift tax is considered tax exclusive because the donee receives the property unreduced by the gift tax paid by the donor.
Question 2
In 2017, Juan gave his nephew, Gustavo, a new car (value $15,000) as a graduation gift. In addition, Juan gave his daughter, Gina, $5,000 in cash. How much did Juan give in taxable gifts?
Correct
Incorrect!
Correct
Incorrect!
Correct
Incorrect!
Correct For 2017, the annual exclusion amount is $14,000. Only the excess over the $14,000 annual exclusion amount would be considered a taxable gift. Here, Gina's $5,000 gift was under the annual exclusion amount. In contrast, Gustavo's $15,000 was over the annual exclusion amount by $1,000. As such, that $1,000 portion would be considered a taxable gift.
Incorrect! For 2017, the annual exclusion amount is $14,000. Only the excess over the $14,000 annual exclusion amount would be considered a taxable gift. Here, Gina's $5,000 gift was under the annual exclusion amount. In contrast, Gustavo's $15,000 was over the annual exclusion amount by $1,000. As such, that $1,000 portion would be considered a taxable gift.
Question 3
In 2017, Matthew gave $14,000 in AOL Time Warner stock to his niece, Candy. He also gave $7,500 in U.S. Treasury bonds to his cousin, Grady.
Correct
Incorrect!
Correct For 2017, the annual exclusion amount is $14,000, per person. Any gifts below that amount are not considered taxable gifts. Here, both gifts are equal to or less than the annual exclusion amount; therefore, Matthew did not give any taxable gifts in 2017.
Incorrect! For 2017, the annual exclusion amount is $14,000, per person. Any gifts below that amount are not considered taxable gifts. Here, both gifts are equal to or less than the annual exclusion amount; therefore, Matthew did not give any taxable gifts in 2017.
Correct
Incorrect!
Question 4
In 2017, Matthew and his wife, Simone, gave $28,000 in AOL Time Warner stock to his niece, Candy. They also gave $15,000 in U.S. Treasury bonds to his cousin, Grady. Simone gave another $15,000 to her sister, Sheila.
Correct
Incorrect!
Correct
Incorrect!
Correct
Incorrect!
Correct A husband and wife, who are both either U.S. citizens or residents, can give up to double the annual exclusion amount ($28,000 in 2017) to the same person during the calendar year without making a taxable gift if they elect to gift split. Here, only the gifts to Candy and Grady are joint gifts. Since they both are equal to or less than the annual exclusion amount for gift splitting, those are not taxable gifts. However, Simone is the only one who gave money to her sister, Sheila. Since she gave Sheila more than the $14,000 annual exclusion amount, the $1,000 excess would be considered a taxable gift.
Incorrect! A husband and wife, who are both either U.S. citizens or residents, can give up to double the annual exclusion amount ($28,000 in 2017) to the same person during the calendar year without making a taxable gift if they elect to gift split. Here, only the gifts to Candy and Grady are joint gifts. Since they both are equal to or less than the annual exclusion amount for gift splitting, those are not taxable gifts. However, Simone is the only one who gave money to her sister, Sheila. Since she gave Sheila more than the $14,000 annual exclusion amount, the $1,000 excess would be considered a taxable gift.
Question 5
Phillip's son, Barney, will leave for college in Massachusetts in a couple of weeks. Phillip paid $55,000 to the university last month for the $35,000 tuition; the balance will cover room, board and other fees. In addition, Phillip deposited $5,000 into Barney's new bank account to cover emergencies.
Correct
Incorrect!
Correct In addition to the annual exclusion amount, there is also an unlimited exclusion for qualified educational expenses paid directly to a school. Here, although Phillip paid $55,000 to the university, only the $35,000 for tuition qualifies for the exclusion. From the $25,000 balance, there is still the $14,000 annual exclusion amount. So, only the excess over the annual exclusion amount ($11,000) would be considered a taxable gift.
Incorrect! In addition to the annual exclusion amount, there is also an unlimited exclusion for qualified educational expenses paid directly to a school. Here, although Phillip paid $55,000 to the university, only the $35,000 for tuition qualifies for the exclusion. From the $25,000 balance, there is still the $14,000 annual exclusion amount. So, only the excess over the annual exclusion amount ($11,000) would be considered a taxable gift.
Correct
Incorrect!
Correct
Incorrect!
Question 6
Marilyn's sister, Mandy, broke her leg and suffered some internal injuries in a motorcycle accident. She spent three days in the hospital and had an operation to put a pin in her leg. Afterwards, she spent four weeks in physical therapy. Since Mandy did not have insurance, Marilyn gave her $32,000 to cover her medical expenses.
Correct
Incorrect!
Correct
Incorrect!
Correct Although there is an annual exclusion for medical expenses, the payment has to be made directly to the facility for the payment to qualify. Here, instead of paying the medical expenses directly to the hospital, Marilyn gave the money directly to Mandy. So, taking into account the $14,000 annual exclusion, the excess ($18,000) would be considered a taxable gift.
Incorrect! Although there is an annual exclusion for medical expenses, the payment has to be made directly to the facility for the payment to qualify. Here, instead of paying the medical expenses directly to the hospital, Marilyn gave the money directly to Mandy. So, taking into account the $14,000 annual exclusion, the excess ($18,000) would be considered a taxable gift.
Correct
Incorrect!
Question 7
Jasmine recently emigrated to the U.S. from Canada to marry her boyfriend, Thomas. They went to Hawaii for their honeymoon. During one of their shopping trips at a local boutique, Thomas bought Jasmine a diamond and ruby pendant for $150,000. The pendant is a taxable gift.
Correct Although there is an unlimited marital deduction applicable to gifts between spouses, that only applies if both spouses are U.S. citizens. For spouses who are not U.S. citizens, the maximum marital deduction is $149,000 (2017 amount). Here, Jasmine is a Canadian citizen. Accordingly, the $1,000 excess over the $149,000 marital deduction would be considered a taxable gift.
Incorrect! Although there is an unlimited marital deduction applicable to gifts between spouses, that only applies if both spouses are U.S. citizens. For spouses who are not U.S. citizens, the maximum marital deduction is $149,000 (2017 amount). Here, Jasmine is a Canadian citizen. Accordingly, the $1,000 excess over the $149,000 marital deduction would be considered a taxable gift.
Correct
Incorrect!
Question 8
Jordan and his wife, Antoinette, recently had their first child. To celebrate the occasion, Jordan bought his wife a brand new Volvo ($35,000) to replace their old station wagon. In addition, he bought her a diamond engagement ring for $350,000. When they married six years ago, he could not afford to buy her a substantial ring. They were high school sweethearts and still live in Orlando, where they were both born and raised. Which of the following is correct?
Correct
Incorrect!
Correct
Incorrect!
Correct
Incorrect!
Correct There is an unlimited marital deduction for gifts between spouses who are both U.S. citizens. Here, both Jordan and Antoinette were born in the U.S. (Florida); therefore, the unlimited marital deduction applies to these gifts. As such, neither is a taxable gift.
Incorrect! There is an unlimited marital deduction for gifts between spouses who are both U.S. citizens. Here, both Jordan and Antoinette were born in the U.S. (Florida); therefore, the unlimited marital deduction applies to these gifts. As such, neither is a taxable gift.
Question 9
Scott gave $12,000 to his alma mater for a special scholarship drive. In addition, during 2017, he gave $15,000 to his church. Lastly, he gave $5,000 to a local homeless shelter.
Correct There is an unlimited deduction allowed for the value of property given to charities. Here, all the organizations are charities. Accordingly, all three donations qualify for the charitable deduction
Incorrect! There is an unlimited deduction allowed for the value of property given to charities. Here, all the organizations are charities. Accordingly, all three donations qualify for the charitable deduction