6.5.1 Basic Quiz -- Life Estate Reserved

A donor who creates a life estate is not allowed a tax deduction for the present value of the remainder interest.

True False

A remainder interest is reduced using straight-line deprecation.

True False

Calculating the straight-line depreciation requires the useful life and the salvage value of the property.

True False

It is desirable to minimize the depreciation amount on the property.

True False

The Treasury uses a useful life of 45 years and a salvage value of 20% in calculating the gift of a life estate.

True False

Depreciation is used for gift tax purposes.

True False

A donor can prevent a present gift (and current gift tax liability) by retaining a right to revoke the gift of a life estate to the second beneficiary.

True False

For a life estate reserved, the lowest AFR produces the greatest deduction.

True False

Mr. Howell has gifted the remainder interest in his personal residence to the local search and rescue organization, a charitable entity. Mr. Howell retains a life estate in the residence for himself and his wife. Mrs. Howell's interest is subject to a right of revocation. Upon Mr. Howell's demise, Mrs. Howell's interest will be included in Mr. Howell's estate and will be subject to estate tax.

True False

Ginger gives the remainder interest in her estate to the "stranded actors" charity. She retains a life estate for herself and the Professor, a very good friend of hers. Because Ginger did not want to pay gift tax immediately upon the creation of the Professor's life estate interest, Ginger retains a testamentary revocation right. At Ginger's death, her estate will be liable for estate tax on the value of the Professor's life estate interest.