CPA Regulation (REG) : Taxable Gifts
Study concepts, example questions & explanations for CPA Regulation (REG)
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Example Questions
Example Question #1 : Taxable Gifts
Which of the following payments requires the filing of a gift tax return?
$20,000 to a political organization.
$20,000 cash to a friend.
$20,000 medical payment to a doctor for a friend.
$20,000 tuition payment to XYZ College for a friend.
$20,000 cash to a friend.
Payments made on another’s behalf paid directly to a health care provider for medical care or to an educational institution are not considered gifts for tax purposes. Additionally, the contribution to the political organization, while non-deductible for tax purposes, does not qualify as a gift (though there are limitations on amounts that may be contributed). Only the cash payment to the individual would require the filing of a gift tax return.
Example Question #2 : Taxable Gifts
On July 1, Year 11, Vega made a transfer by gift in an amount sufficient to require the filing of a gift tax return. Vega was still alive in Year 12. If Vega did not request an extension of time for filing the Year 11 gift tax return, the due date for filing was:
March 15, Year 12
April 15, Year 12
June 30, Year 12
June 15, Year 12
April 15, Year 12
The gift tax return date is the same date as individual tax returns, April 15 of the subsequent year of the transfer.
Example Question #3 : Taxable Gifts
Parents lend $2,000,000 to their child to start a business. The loan is interest free and is payable on demand. The imputed interest is subject to:
The generation-skipping transfer tax, but not the gift tax.
The gift tax each year the loan is outstanding.
An excise tax.
The gift tax only in the year the parents lend the money.
The gift tax each year the loan is outstanding.
In this instance, the parents gave an advantageous loan to their child, the sort of which they would not give to a third party at arm’s length. As a result, the “lost” interest income (had they made a loan to another party at arm’s length) each year is treated the same as a gift.
Example Question #1 : Taxable Gifts
Assuming tax law in effect during 2019, what amount of a decedent’s taxable estate is effectively tax free if the maximum applicable estate and gift tax credit is taken?
$15,000
$11,400,000
$4,500,000
$0
$4,500,000
The max amount that can be transferred pursuant to a death tax free is $11,400,000.
Example Question #4 : Taxable Gifts
Of the following, which is a valid deduction from a decedent’s gross estate?
Unified credit
Federal estate tax
Income tax paid on income earned and received after the decedent’s death
Expenses of administering and settling the estate
Expenses of administering and settling the estate
Expenses of administering and settling the estate are valid deductions from a decedent’s gross estate.
Example Question #5 : Taxable Gifts
Of the following, which transfer of money would require filing a full gift tax return?
Direct medical payment to a medical facility for a family member
Contribution to a political group
College tuition payment directly to the university
Payment of $30,000 cash to a friend
Payment of $30,000 cash to a friend
As of 2020, the exclusion amount for a gift tax is $15,000. This means that funds in excess of $15,000 not excluded, such as a medical payment or tuition, must have a return filed for them.
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