CFP

AAA

Gifting - Answer Key

1. D

Each person can gift up to $14,000 per individual per year (2013) under the annual exclusion amount. A husband and wife can gift $28,000 ($14,000 x 2).

2. A

Taxable Estate + Taxable Gifts = Tax Base

3.
A When you sell gifted stock for a loss, your basis is the lower of: (1) the donor's basis or (2) the fair market value on the date the stock was given to you. If the fair market value rule applies, your holding period begins on the date you received the shares, rather than on the earlier date the donor acquired them. Jeremy's basis is $40,000 in the stock, if he sells it for $35,000, then he has a $5,000 short-term loss.

4.
D

If you sell for a gain, you take over the donor's basis in the stock given to you. In this case, your holding period includes the donor's duration of ownership for purposes of qualifying for long-term capital gain treatment. Harold's basis of $100,000 is transferred to Jeremy. Jeremy sells for $150,000 and he has a $50,000 LT capital gain.

5. B

When trying to reduce the value of a taxable estate, the best gifts to transfer are those which are highly appreciable. Vehicles and boats are typically depreciating assets. The couple can gift up to $28,000 in stock to each grandchild for the tax year, and stay under the annual gift exclusion amount.

6. B

Split gifts and gifts exceeding the annual exclusion amount will require a Form 709 filing.

7.
D

Transfers excluded from the gift tax include: direct payments to educational institutions for qualified education costs, direct payments to medical facilities for qualified medical bills and political contributions.

8.
C

Transfers to CRATs, CRUTs and pooled income funds are not considered GSTT transfers.

9. B

The lifetime gift and estate exemption amount is $5,250,000 for tax year 2013.

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