ExpertMedium1 markMultiple Choice
CPA · Question 21 · Area 2: Financial Planning
Grandparent contributes $100,000 to a 529 plan for their grandchild in Year 1. The annual gift tax exclusion is $18,000. The grandparent elects to treat the contribution as being made ratably over 5 years. Grandparent dies in Year 3. What amount is included in the Grandparent's gross estate?
Grandparent contributes $100,000 to a 529 plan for their grandchild in Year 1. The annual gift tax exclusion is $18,000. The grandparent elects to treat the contribution as being made ratably over 5 years. Grandparent dies in Year 3. What amount is included in the Grandparent's gross estate?
Answer options:
A.
$0
B.
$40,000
C.
$60,000
D.
$100,000
How to approach this question
1. Identify 5-Year Election: $100,000 / 5 = $20,000 per year deemed contribution.<br/>2. Timeline: Year 1 ($20k), Year 2 ($20k), Year 3 ($20k), Year 4 ($20k), Year 5 ($20k).<br/>3. Death in Year 3: The contributions allocated to years *after* death are included in the estate.<br/>4. Included: Year 4 ($20k) + Year 5 ($20k) = $40,000.
Full Answer
B.$40,000✓ Correct
B
The $100,000 is treated as $20,000 per year. Since the donor died in Year 3, the amounts allocated to Year 4 and Year 5 ($20,000 + $20,000 = $40,000) are included in the gross estate.
Common mistakes
Including the entire amount or excluding the entire amount.
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