Question 14 Which of the following statements is most correct about the $5,000 or 5% (5x5) rule? It converts a future interest gift into a present interest gift. It eliminates estate taxation in the grantor's estate for lifetime gifts to a trust. The rule prevents a release or lapse of a power of appointment from being taxed as a gift if it meets the requirements of the rule. The rule states that if a trust distributes no more than the greater of $5,000 or 5% of the trust corpus to any beneficiary, that amount will not be subject to the income tax when received by the beneficiary Question 15 Donald puts a lot of money into a bucket and gives Melania a power of appointment over the money in the bucket. Melania has the power to distribute that money to any other human being on the planet except herself, her creditors, her estate, or her estate's creditors. What is the correct name for her power of appointment? It is a/an: General power of appointment Limited power of appointment Question 16 In order for a transfer to qualify for the annual exclusion, which of the following is not true? It must be a present interest It must be a completed gift It cannot exceed $15,000 in 2020 unless the spouse consents. It can never be a gift to a trust It must be gratuitous.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question 14

Which of the following statements is most correct about the $5,000 or 5% (5x5) rule?

		It converts a future interest gift into a present interest gift.
		It eliminates estate taxation in the grantor's estate for lifetime gifts to a trust.
		The rule prevents a release or lapse of a power of appointment from being taxed as a gift if it meets the requirements of the rule.
		The rule states that if a trust distributes no more than the greater of $5,000 or 5% of the trust corpus to any beneficiary, that amount will not be subject to the income tax when received by the beneficiary

Question 15

Donald puts a lot of money into a bucket and gives Melania a power of appointment over the money in the bucket. Melania has the power to distribute that money to any other human being on the planet except herself, her creditors, her estate, or her estate's creditors. What is the correct name for her power of appointment? It is a/an:

General power of appointment

Limited power of appointment

Question 16

In order for a transfer to qualify for the annual exclusion, which of the following is not true?

		It must be a present interest
		It must be a completed gift
		It cannot exceed $15,000 in 2020 unless the spouse consents.
		It can never be a gift to a trust
		It must be gratuitous.

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