In 1995,Thalia Purchases Land for $900,000 and Lists Title in the Names

question 154

Multiple Choice

In 1995,Thalia purchases land for $900,000 and lists title in the names of her daughters as follows: "April and Theresa,joint tenants with right of survivorship." In 1999,April and Theresa purchase an apartment building for $1 million as equal tenants in common;April furnished $400,000 and Theresa furnished $600,000 of the cost.April dies first in 2012 when the land is worth $1.5 million and the apartment building is worth $2 million.One of the results of these transactions is:

• A)April made a gift to Theresa of $100,000 in 1999.
• B)None of the land is included in April's gross estate.
• C)April's gross estate includes $800,000 (40% ´ $2 million)as to the apartment building.
• D)April's gross estate includes $1,750,000 as to these properties.
• E)None of the above.

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Definitions:

T-bill Rate

The interest rate earned by investors in U.S. Treasury bills, which are short-term government securities.

Out-of-the-money

Describes an option that would not make money if it were exercised immediately because its strike price is not favorable compared to the current market price of the underlying asset.

Intrinsic Value

The perceived or calculated true value of an asset, investment, or company based on fundamental analysis rather than current market price.

Equilibrium

A state in which market supply and demand balance each other, resulting in stable prices and no tendency for change.