Sandra, Who Is Married, Creates an Irrevocable Trust in the Amount

question 13

Multiple Choice

Sandra, who is married, creates an irrevocable trust in the amount of $200,000 for her 18-year-old daughter, Kelly. She names the bank as trustee. Before Kelly reaches age 21, the trustee may pay the income to Kelly. Kelly will receive any undistributed assets when she reaches age 21. If Kelly dies before age 21, the assets will be paid to her estate. In addition, Sandra creates an irrevocable trust for her son, Kevin, age 21. He is entitled to withdraw up to $30,000 per year. Sandra contributes $30,000 in the current year. Sandra elects gift splitting with her husband. Her husband makes no gifts in the current year. Sandra's annual exclusions to be claimed on her gift tax return total

• A)$30,000.
• B)$15,500.
• C)$12,000.
• D)$0.

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Definitions:

Direct Financing Lease

A type of lease where the lessor effectively transfers all the risks and rewards incidental to ownership to the lessee without transferring legal ownership.

Sales-Type Lease

A lease agreement where the lessor recognizes immediate profit similar to a sale, often used in the context of finance leases in accounting.

Unearned Interest: Leases

Interest that has been collected on a lease but not yet earned, often because the period it covers has not fully elapsed.