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R dies in 2016. R made taxable gifts during his lifetimein 1990, 1991, 1993, 1997, and 1999, but paid no Federal transfertaxes due to the unified transfer tax credit in effect in thoseyears. What effect will these taxable gifts have on determining thefollowing:

  1. R’s Federal taxable estate?
  2. The rates imposed on the Federal taxablestate?

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Related questions

1. “A” is in the 28% marginal income tax bracket. He acquired 400 shares of XYZ Inc. Common stock two years ago for $60,000, but the stock’s current market value is $45,000. “A” plans to give 200 shares of the stock to each of his two granddaughters. Rowena is age 19 and Susan is age 12. Under these circumstances, all of the following statements are correct EXCEPT:

A. If “A” makes the gifts to the children, he will lose the tax benefit of the $15,000 loss available if he sold the stock.

B. “A” can use the $14,000 annual exclusion for both stock gifts.

C. If the grandchildren sell the stock immediately after receiving the stock, they both may take a loss based on “A’s” cost basis.

D. If Rowena keeps her stock, any dividends will be taxable at her marginal income tax bracket.

E. If Susan keeps her stock, any dividends in excess of $1,800 will be taxable at her parent’s marginal income tax bracket.

2. Which of the following statements correctly identify(ies) significant differences between UGMA and UTMA?

I. UGMA places no restrictions on types of property that may be transferred, whereas UTMA does place restrictions.

II. UGMA permits both lifetime and testamentary transfers, but UTMA permits only testamentary transfers.

A. I only

B. II only

C. Both I and II

D. Neither I nor II

3. Which of the following statements concerning the “gross-up” rule is (are) correct?

I. Income taxes paid in the year of death are includible in the deceased’s gross estate.

II. Gift taxes paid in the year of death are included in the deceased’s gross estate.

III. Life insurance given in the year prior to the year of death is excluded from the deceased’s gross estate.

A. I only

B. II only

C. I and II only

D. II and III only

4. All the following statements concerning the income, estate, and gift tax consequences of a gift to a 2503(c) trust for a minor are correct EXCEPT:

A. The income can be accumulated in the trust, but if the income exceeds $2,100 it is taxable to the minor at the parent’s marginal tax bracket.

B. The fair market value of the assets up to $14,000 can qualify for the gift tax annual exclusion.

C. The “throwback” rules do not apply to income accumulated before the minor reaches age 21.

D. Assets transferred to the trust are not includible in the donor’s gross estate for federal estate tax purposes if the donor is not the trustee.

5. A gift of a partial or future interest in property is generally nondeductible.However, there are specific exceptions.A current deduction is available for all the following contributions to a qualified organization EXCEPT:

A. The gift of a remainder interest in a personal residence or farm with the stipulation that the donor may continue to reside there for his or her lifetime.

B. The gift of a remainder interest in real property granted only for conservation purposes.

C. The gift of a remainder interest in tangible personal property with the stipulation that the donor may retain possession of the property during his or her lifetime.

D. The gift of a remainder interest in property where the donor retains an income interest, provided the gift is transferred in trust.

Note: This problem is for the 2018 taxyear.

Janice Morgan, age 24, is single and has no dependents. She is afreelance writer. In January 2018, Janice opened her own officelocated at 2751 Waldham Road, Pleasant Hill, NM 88135. She calledher business Writers Anonymous. Janice is a cash basis taxpayer.She lives at 132 Stone Avenue, Pleasant Hill, NM 88135. Her SocialSecurity number is 123-45-6789. Janice's parents continue toprovide health insurance for her under their policy. Janice wantsto contribute to the Presidential Election Campaign Fund.

During 2018, Janice reported the following income and expenseitems connected with her business.

Income from sale of articles $85,000
Rent 16,500
Utilities 7,900
Supplies 1,800
Insurance 5,000
Travel (including meals of $1,200) 3,500

Janice purchased and placed in service the following fixedassets for her business. Janice wants to elect immediate expensingunder § 179, if possible.

  • Furniture and fixtures (new) costing $21,000 on January10.
  • Computer equipment (new) costing $12,400 on July 28.

Janice’s itemized deductions include:

State income tax $2,950
Home mortgage interest paid to First National Bank 6,000
Property taxes on home 2,500
Charitable contribution to her alma mater, State College 1,200

Janice did not keep a record of the sales tax she paid. Theamount from the sales tax table is $437.
Janice reports interest income of $4,000 on certificates of depositat Second National Bank. She made estimated tax payments of $3,000for 2018.

Required:
Compute Janice Morgan’s 2018 Federal income tax payable (or refunddue) by providing the following information that would be reportedon Form 1040 and Schedules A, B, C, and SE.

  • Make realistic assumptions about any missing data.
  • If an amount is zero, enter "0".
  • Enter all amounts as positive numbers.
  • When computing the tax liability, do not round your immediatecalculations.
  • If required, round your final answers to the nearestdollar.

  • Provide the following that would be reported on Janice's Form1040:

    1. Filing status: The taxpayers' filingstatus:

    2. Calculate taxable gross income.
    $

    3. Calculate the total adjustments forAGI.
    $

    4. Calculate adjusted gross income.
    $

    5. Calculate the greater of the standarddeduction or itemized deductions.
    $

    6. Calculate the qualified busies incomededuction.
    $

    7. Calculate total taxable income.
    $

    8. Calculate the income tax liability.
    $

    9 Calculate SE taxes due.
    $

    10. Calculate the total tax creditsavailable.
    $

    11. Calculate total withholding and taxpayments.
    $

    12. Calculate the amount overpaid(refund):
    $

    13. Calculate the amount of taxes owed:
    $

    Provide the following that would be reported on Janice'sSchedule A:

    1. Calculate the deduction allowed for medicaland dental expenses.
    $

    2. Calculate the deduction for taxes.
    $

    3. Calculate the deduction for interest.
    $

    4. Calculate the charitable deductionallowed.
    $

    5. Calculate total itemized deductions.
    $Provide the following that would be reported on Janice's ScheduleB:

    1. Calculate the interest amount:
    $

    2. Calculate the ordinary dividends:
    $

    Provide the following that would be reported on Janice'sSchedule C:

    1. Calculate income from sales:
    $

    2. Calculate total expenses:
    $

    3. Calculate net profit or loss
    $ Provide the following that would be reported on Janice's Form4562.

    Click here to access Exhibit 8.1 and the depreciation tables inthe textbook.

    1. Calculate the total deprecation for thefurniture and fixtures:
    $

    2. Calculate the total depreciation for thecomputer equipment.
    $

    Provide the following that would be reported on Janice'sScheduled SE. When computing the self-employment tax liability, donot round your calculations. Round your final answers to thenearest dollar. Use rounded amount when determining the deductionfor self-employment tax.

    1. Calculate the self-employmentliability:
    $

    2. Calculate the eduction for self-employmenttax:
    $

    2018 Tax Rate Schedules

    Use the 2018 Tax Rate Schedules to compute the tax.

    Note: Because the tax rate schedules are used instead of the taxtables, the amount of tax computed may vary slightly from theamount listed in the tables. This variation occurs because the taxfor a particular income range in the tax table is based on themidpoint amount.

    2018 Tax Rate Schedules
    Single—Schedule X Head of household—Schedule Z
    If taxable incomeis:
    Over—     		But not
    over—    		 The taxis: of the amount
    over—    		 If taxable incomeis:
    Over—     		But not
    over—    		 The taxis: of the amount
    over—
    $0 $9,525 . . . . . . 10% $0 $0 $13,600 . . . . . . 10% $0
    9,525 38,700 $952.50 + 12% 9,525 13,600 51,800 $1,360.00 + 12% 13,600
    38,700 82,500 4,453.50 + 22% 38,700 51,800 82,500 5,944.00 + 22% 51,800
    82,500 157,500 14,089.50 + 24% 82,500 82,500 157,500 12,698.00 + 24% 82,500
    157,500 200,000 32,089.50 + 32% 157,500 157,500 200,000 30,698.00 + 32% 157,500
    200,000 500,000 45,689.50 + 35% 200,000 200,000 500,000 44,298.00 + 35% 200,000
    500,000 . . . . . . 150,689.50 + 37% 500,000 500,000 . . . . . . 149,298.00 + 37% 500,000
    Married filing jointly or Qualifyingwidow(er)—Schedule Y-1 Married filing separately—ScheduleY-2
    If taxable incomeis:
    Over—     		But not
    over—    		 The taxis: of the amount
    over—    		 If taxable incomeis:
    Over—     		But not
    over—    		 The taxis: of the amount
    over—
    $0 $19,050 . . . . . . 10% $0 $0 $9,525 . . . . . . 10% $0
    19,050 77,400 $1,905.00 + 12% 19,050 9,525 38,700 $952.50 + 12% 9,525
    77,400 165,000 8,907.00 + 22% 77,400 38,700 82,500 4,453.50 + 22% 38,700
    165,000 315,000 28,179.00 + 24% 165,000 82,500 157,500 14,089.50 + 24% 82,500
    315,000 400,000 64,179.00 + 32% 315,000 157,500 200,000 32,089.50 + 32% 157,500
    400,000 600,000 91,379.00 + 35% 400,000 200,000 300,000 45,689.50 + 35% 200,000
    600,000 . . . . . . 161,379.00 + 37% 600,000 300,000 . . . . . . 80,689.50 + 37% 300,000

1. All the following statements concerning the use of an insured corporate cross-purchase buy-sell agreement are correct EXCEPT:

A. The value of any life insurance policies the deceased owned on the lives of the other stockholders will be included in his or her gross estate.

B. The buy-out will not involve dividend distributions to the deceased’s estate or his or her family.

C. It is preferred over the redemption-type agreement when the stockholders are all in a higher tax bracket than the corporation.

D. The surviving stockholders get an increase in their basis for income tax purposes.

E. It produces greater equity of results than a redemption-type agreement when there is a significant difference in the ages of the stockholders and in their percentages of stock ownership.

2. All the following provisions are usually included in an insured stock cross-purchase buy-sell agreement EXCEPT:

A. A provision giving each surviving stockholder an option to buy a proportionate part of a deceased’s stock.

B. A provision establishing the purchase price to be paid for the stock of a deceased stockholder.

C. A provision committing each stockholder to buy and maintain life insurance on the other stockholders.

D. A provision permitting each surviving stockholder to buy from the estate of a deceased stockholder the life insurance the deceased’s estate owns on the life of each surviving stockholder.

3. All the following statements concerning the tax implications of a gift made to a person who dies within one year of receipt of the gift are correct EXCEPT:

A. If the property is willed back to the original donor, such property is denied the usual stepped-up basis for valuing property transferred to a designated heir.

B. The beneficiary of the deceased’s will can be in receipt of capital gains, even if he or she sells the property on the date of the testator’s death.

C. If the decedent wills the property to someone other than the original owner or his or her spouse, the transferee can have the benefit of the stepped-up basis.

D. If the original donor is the spouse of the decedent-donee, a testamentary disposition to the decedent’s children will prevent realization of the benefits of the stepped-up basis.

4. D and E, a married couple, make a gift of their vacation home to their children but reserve the right to use the property during their lifetimes. Under these circumstances, which of the following statements are correct?

I. The property will be included in the donor’s gross estate at their deaths.

II. The gift tax annual exclusion is not available to D and E.

III. The unified tax credit is available to D and E.

A. I and II only

B. I and III only

C. II and III only

D. I, II and III

5. Which of the following statements most accurately describes the rights conveyed to a minor under the terms of a trust that give the minor a so-called “Crummy” power?

A. The right to withdraw the corpus at any time during minority.

B. The right to accumulate trust income to age 21 and the right to receive these funds as a distribution of corpus.

C. The right to withdraw limited amounts of the trust corpus for a limited time after a contribution is made to the trust.

D. The right to withdraw the trust’s income for the calendar year without a guardian’s approval.

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