Estate Planning Exam 2 Pt. 1
Which of the following statements concerning conditions that must be met in order for the value of an annuity to be included in a decedent's gross estate is (are) correct? I. The annuity must provide for payments to one or more beneficiaries if they survive the descendent II. The descendent must have actually received payments prior to death
I only
Sam owns 500 acres of farmland. All the following are requirements for the farmland to qualify for and retain special-use (current use) valuation upon Sam's death EXCEPT
The special use tax savings will not be recaptured as long as the qualified heir does not dispose of the property for at least 2 years following Sam's death
Suppose in a year when the annual exclusion is $13,000 Zoe gives gifts of a present interest of $20,000 to a qualified charity and $75,000 to her husband who is a US citizen. If Zoe and her husband elect to split gifts, all of the following statements concerning the calculation of Zoe's taxable gifts are correct EXCEPT
The total value of gifts deemed to have been made by Zoe for gift tax purposes is $95,000
Which of the following statements concerning trusts is correct?
A sole trustee can also be a beneficiary in the same trust
All the following statements concerning powers of appointment are correct EXCEPT
A testamentary power must be exercised before the death of the donee
All of the following transfers made within 3 years of death cause property to be included in the decedents gross estate EXCEPT
An outright transfer of stock to the decedent's son
Property would be included in the Jack's gross estate at the time of death in all the following situations EXCEPT
12 years before his death, Jack placed a valuable painting in an irrevocable trust created to benefit his son, but he reserved the right to keep the painting in his own home for 5 years
Which of the following property or property interests would be excluded from the decedent's gross estate for federal estate tax purposes?
A property interest that the descendent had no right to transfer to another at death no matter how great the decedents interest were during the lifetime
All of the following statements concerning a simple trust are correct EXCEPT
Accumulation of trust income is allowed
Given the information below, which of the following values is the amount of your client's tentative tax base for federal estate tax purposes?
Adjusted gross estate= $5,500,000 Funeral and estate administration expenses=$200,000 Marital deduction=$2,100,000 Adjusted taxable gifts=$300,000 → $3,700,000
All of the following statements concerning tenancy by the entirely are correct EXCEPT
All states have this type of property interest
Suppose in a year when the annual exclusion is $13,000, Jim gives present-interest gifts of $30,000 to his son and $50,000 to his wife, who is a US citizen. If Jim and his wife elect to split gifts, which of the following statements concerning calculations of Jim's gifts is correct?
Allowable annual exclusions equal $26,000
All the following statements concerning the filling of the federal estate tax return and the payment of federal estate tax are the correct EXCEPT
An extension of time to file the estate tax return both extends the time for payment of the taxes due and delays the date interest begins to accrue on any unpaid taxes
The full proceeds of a life insurance policy would be included in the decedent's gross estate in all the following situations EXCEPT
At the time of death, the descendent owned a premium-paying whole life policy on the life of another person
Which of the following statements concerning a durable power of attorney is (are) correct? I. A competent principal may revoke the instrument establishing a durable power of attorney at any time II. A durable power of attorney that expressly authorizes the agent to make gifts on behalf of the principal can provide numerous gift and estate tax benefits
Both I and II
In which of the following situations would part of the value of Bill's vacation home (other than any unconsumed payments received and related interest earned prior to his death) be included in Bill's gross estate upon his death?
Bill makes a regular installment sale of his vacation home to his son, and Bill dies during the term of the installment note
A decedent's interest in a closely held business must be more than 35% of his or her adjusted gross estate in order for the estate to qualify for tax treatment under which of the following code sections? I. Sec. 6166 (deferral and installment payment of estate tax). II. Sec. 303 (capital gains treatment for certain stock redemptions)
Both I and II
Bart's dad gave him $100,000. Because Bart is a successful professional, he did not need the money and refused to accept it. Bart's dad then gave the money to Bart's sister. Which of the following statements concerning the taxation of the gift is (are) correct? I. If, in refusing the gift, Bart gave his dad a qualified disclaimer, Bart's dad is considered to have made a transfer to Bart's sister that is subject to the federal gift tax II. If, in refusing the gift, Bart did not give his dad a qualified disclaimer, Bart is considered to have made a transfer to his sister that is subject to the federal gift tax.
Both I and II
Suppose in 2011 when the annual exclusion is $13,000, Tom makes a gift of $50,000 to his wife, Maggie, and a gift of $20,000 to his son, Matt. If Tom and Maggie elect to split gifts, which of the following statements concerning the amount of annual exclusions each spouse can claim for federal gift tax purposes is correct? I. Tom's annual exclusions total $23,000 II. Maggie's annual exclusion is $10,000
Both I and II
The proceeds of a life insurance policy on the life of a decedent would be included in the decedent's gross estate in which of the following situations? I. If the decedent possessed incidents of ownership in the policy at death, but it was impossible for him or her to exercise the rights at death. II. If the descendent posses incidents of ownership in the policy at death but could not exercise the rights without the consent of some other person
Both I and II
Which of the following is (are) included in the gross estate? I. What the estate owner actually owned at the date of death II. What the estate owner is deemed to have owned at the date of death
Both I and II
Which of the following requirements must be met in order for the transfer of a reversionary interest taking effect at death to be pulled into a decedent's gross estate? I. The possession or enjoyment of the transferred property can be obtained only by the beneficiary's surviving the decedent. II. The descendent retained a reversionary interest that was worth more than 5 percent of the value of the transferred property immediately before death
Both I and II
Which of the following statements concerning a spendthrift provision in a trust instrument is (are) correct? I. This provision provides a restriction against attachment by creditors of trust asset, whether they are creditors of the beneficiary or the grantor. II. With this provision, the trust protects the property governed by the trust from the beneficiaries own indiscretion and poor judgment
Both I and II
Which of the following statements concerning income in respect of a descendent (IRD) is (are) correct? I. IRD is both includible at full value in the decedent's gross estate for estate tax purposes and taxed to the beneficiary of the income as ordinary income for income tax purposes II. The beneficiary of the IRD is allowed an income tax deduction for t he additional estate tax due to the IRD's being included in the gross estate
Both I and II
Which of the following statements concerning payment of gift tax is (are) correct? I. The donor of the gift is primarily liable for the gift tax. II. If the donor for any reason fails to pay the tax when it falls due, the done becomes liable to the extent of the value of the gift
Both I and II
Which of the following statements concerning the martial deduction and bypass planning is (are) correct? I. Generally, the testator's will set up two trusts-a martial trust to hold the assets that qualify for the martial deduction and non- martial (bypass) trust that, ideally, should be funded with assets equivalent to the testator's basic exclusion amount (credit equivalent) II. Bypass planning avoids stacking assets into the surviving spouse's estate and thus provides the opportunity for significant estate tax savings
Both I and II
Which of the following statements concerning the sale of trust assets to the trustee is (are) correct? I. The sale is voidable (reversible) by the beneficiaries unless they are fully devised of all pertinent facts and consent. II. If any of the beneficiaries are minors, they do not have the capacity to consent to a sale, and thus is not binding on them.
Both I and II
Which of the following statements concerning the alternate valuation date allowed for federal estate tax purposes is correct?
If the alternate valuation date is selected, that date applies to al assets in the estate, subject to a few exceptions
All of the following statements concerning the inclusion of property held in joint tenancy with right of survivorship in the estate of the first tenant to die are correct EXCEPT
Even if the decedent's estate can prove that the descendent did not contribute to the purchase of the joint tenancy with persons other than spouse alone, the decedent's fractional share of the property is included in the decedent's estate
Give the following information for your client, what is the amount of gift tax payable for 2011?
Gift tax on all prior taxable gifts=$25,000 Gift tax on all taxable gifts regardless of when made=$100,000 Gift tax credit=$1,730,800 Current annual exclusion=$13,000 →$0
If a trust that is required to pay out, "all the income" to the beneficiaries received $5,000 in capital gains from the sale of assets and $3,000 from dividends on the stock it held, which of the following statements concerning this income is (are) correct? I. $3,000 (the amount of the dividends) would be distributed and taxed to the beneficiaries. II. $5,000 would be retained in the trust and not taxed until it is eventually distributed to the beneficiaries
I only
If the redemption of stock to pay death taxes qualifies for Sec. 303 treatment, which of the following statements is (are) correct? I. If the stock was held as a capital asset in the hands of the decedent at the treatment, rather than being treated as a divided. II. If the value of the stock increased prior to the decedent's death, the estate realizes a taxable gain from the redemption
I only
Suppose Jessie places income-producing property in a trust with the income to be paid annually to her father for lie and at her father's death, the remainder payable to her daughter. The annual exclusion would be allowed for which of these gifts? I. The gift of the trust income to be paid annually to her father for life II. The gift of the remainder interest to her daughter.
I only
Which of the following statements concerning an estate freeze as an effective estate planning technique is (are) correct? I. With an estate freeze, the appreciation in property subject to the freeze accrues to someone other than the original owner. II. With an estate freeze, the owner transfers all interests in the property during his or her lifetime
I only
Which of the following statements concerning fiduciaries is (are) correct? I. All fiduciaries are required to manage the property in their care according to strict fiduciary principles and standards established by state law II. Because of fiduciaries hold a special position of trust in relation to the beneficiaries, the standard of conduct for fiduciaries is interpreted the same for both lay fiduciaries and professional fiduciaries
I only
Which of the following statements concerning the availability of the martial deduction in the case of a resident-alien spouse is (are) correct? I. A surviving resident-alien spouse is eligible for the marital deduction if the surviving spouse becomes a US citizen before the descendent spouses' estate tax return is filled and remains a US resident after the death of the citizen spouse. II. If a resident-alien spouse is the first to die, the marital deduction is not allowed for property transferred to the surviving citizen spouse
I only
Which of the following statements concerning the inclusion of property subject to indebtedness in a decedent's estate is (are) correct? I. If the descendent is personally liable for the indebtedness, the full value of the property is included in the gross estate, and the estate is allowed a deduction for the amount of the debt. II. If the descendent is not personally liable for the indebtedness, no interest in the property is included in the gross estate
I only
Which of the following statements concerning the inclusion of the value of property in a decedent's gross estate for federal estate tax purpose is (are) correct? I. A descendent spouse's gross estate includes only the decedent's half interest in community property even if the community property is titled solely in the decedent's name. II. In a common-law state, the descendent spouse's gross estate would include the value of the entire property, regardless of how the martial property was titled
I only
64. Which of the following statements concerning the tax treatment of a grantor-retained annuity trust (GRAT) and a grantor-retained unitrust (GRUT) is (are) correct? I. The gift of the remainder interest in a GRAT or a GRUT qualifies for the annual exclusion. II. If the grantor survives the retained interest term in a qualified GRAT or GRUT, the corpus, including any post transfer appreciation, is excluded from the grantor's gross estate.
II only
If a closely held business interest is more than 35% of the decedent's adjusted gross estate, which of the following statements concerning the deferral of payment of estate tax attributable to that business interest under Sec. 6166 is (are) correct? I. Payments of tax attributable to the business interest may be deferred for up to approximately 15 years from the due date and then be paid in installments II. If a payment is late (more than 6 months overdue), all remaining unpaid estate tax becomes due and payable immediately upon notice and demand of the Internal Revenue Service
II only
Which of the following gratuitous transfers is (are) excluded from taxable gifts? I. $20,000 given to the donor's son to pay his college tuition for the year II. $25,000 paid to a hospital for treatment of the donor's adult son
II only
Which of the following statements concerning the activities of a fiduciary/ trustee is (are) correct? I. A trustee may sell trust property to himself or herself as an individual as long as the property is acquired at fair market value. II. A trustee should not personally sell his or her property to the trust if there is any appearance of self-dealing or personal profit to be gained by the trustee through the transaction
II only
Which of the following statements concerning the inclusion of property or property interests in a decedent's gross estate is (are) correct? I. If a shareholder dies after a dividend is declared but before the record date, the value of the dividend is included in the decedent's gross estate. II. The gross estate includes any amount to which the decedent was entitled before he or she died
II only
Which of the following statements concerning the valuation of stock of a closely held corporation for federal estate tax purposes is (are) correct? I. Revenue regulations establish a fixed formula of valuation that must be used in all closely held corporation situations. II. When assets are valued at cost on the corporations books, adjustments are necessary to reflect the difference between true market value and cost when determining the value of the closely held corporation's stock
II only
Frank purchased property for $20,000 in 1996 that appreciated in value to $120,000 2 years ago. Which of the following statements concerning the taxation of the property is correct?
If Frank left the property to his daughter by will and he died two years ago, the daughter would have a gain of $10,000 for income tax purposes when she later sold the property for $130,000
If Tom, Jerry, and Janet, three close friends, hold property in joint tenancy with right of survivorship and Tom dies first when the property is worth $300,000, which of the following statements concerning the amount included in Tom's gross estate is correct?
If Toms estate can prove that Jerry and Janet paid the entire purchase price of the property because Tom was out of work at the time, no amount of the joint tenancy would be included in Tom's estate at the time of his death
All of the following statements concerning the selection of a trustee are correct EXCEPT
If a beneficiary is also named as trustee, there is the opportunity to have greater flexibility in a trust as well as the most favorable tax consequences
All of the following statements concerning gifts of life insurance and annuities are correct EXCEPT
If each beneficiary of a revocable life insurance trust has Crummey powers, the trust qualifies as a present-interest gift for the beneficiaries and thus qualifies for the annual exclusion
All the following statements concerning estate planning involving nontraditional living arrangements are correct EXCEPT
If nonmaritial partner dies without a will and without children, the surviving partner will receive a portion of the decedents estate under the state intestacy statues
If a trust earns $20,000 in income, all the following statements concerning the taxation of the income are correct EXCEPT
If the $20,000 is taxable income and the trust distributes $25,000 to its sole beneficiary, the beneficiary is taxed on $25,000
Which of the following statements concerning the federal estate taxation of annuity products is correct?
If the decedent's employer promised retirement benefits to the descendent for lie and then to a designated beneficiary who survives the descendent, the value of the surviving beneficiary's annuity would be include in the decedent's estate even if the descendent never received any benefits
All the following statements concerning the valuation of life insurance gifts are correct EXCEPT
If the policy is in the premium-paying state at the time it is transferred, the value of the gift is the sum of the premiums paid to the date of transfer
Which of the following statements concerning intestate succession is correct? →
If there is no surviving spouse, surviving children may inherit the decedents entire estate
Which of the following statements concerning tenancy by the entirely is correct?
It is limited to co-ownership of property held by a husband and wife
In which of the following situations would property be included in Jane's gross estate?
Jane created an irrevocable trust providing income to her son for life with the remainder going to his children upon his death; but she retained the right to change the trust beneficiaries with the consent of her husband
All of the following statements concerning fiduciary responsibilities are correct EXCEPT
Like a personal representative of an estate and a guardian, a trustee is required to make an accounting to the court
All of the following statements concerning state death taxations are correct EXCEPT
Most states limit state death taxes to varying percentages of a decedent's federal gross estate
Ken puts 10,000 shares of Wells Fargo stock selling at $47 per share into a revocable trust for his children and grandchildren. At the time Ken finally relinquished control over the trust, the stock was selling at $75 per share. Which of the following statements concerning the gift tax implications is (are) correct? I. The gift is complete at the time the stock is transferred to the trust II. The gift tax payable by Ken will be substantially reduced because he set up and funded the trust when the stock was selling for $47 per share, rather than waiting until the time it was selling for $75 per share
Neither I or II
Which of the following statements concerning a 5 and 5 power is (are) correct? I. With a 5 and 5 power, the donee's power is limited to a noncumulative right to withdraw the smaller of $5,000 or 5 percent of the aggregate value of the property each year. II. If the done with a 5 and 5 power repeatedly fails to exercise the power by not withdrawing the permitted amount annually, no property will be included in the donee's gross estate at death
Neither I or II
Which of the following statements concerning advance medical directives is (are) correct? I. In most states, a living will may provide direction in nonterminal, as well as terminal, medical situations. II. Medical durable powers of attorney are limited to decisions concerning artificial-life-support issues
Neither I or II
Which of the following statements concerning property held as tenancy in common is (are) correct? I. Because each ownership portion is an undivided part of the whole property, a single tenant cannot sell his or her interest in the property II. Tenancy is common can be used only with real property
Neither I or II
Which of the following statements concerning the number of annual exclusions to which the donor of a gift is entitled is (are) correct? I. A donor of a gift in trust for three beneficiaries is entitled to only one annual exclusion for the trust. II. A donor who gives his olden son two gifts and his youngest son one gift in a given year is entitled to three annual exclusions (one for each gift)
Neither I or II
Which of the following statements concerning the taxation of income in respect of a descendent (IRD) is (are) correct? I. For income tax purposes, IRD is taxed to the decedent's estate, regardless of who receives the income II. If IRD is subject to income taxation, it is not included in the decedents' gross estate for estate tax purposes?
Neither I or II
All of the following statements concerning situations in which certain items can be deducted either on the federal estate tax return or on income tax return are correct EXCEPT
Once a decision has been reached as to whether it is more advantageous to take the allowable deduction on the estate tax return or the estate's income tax return, all of the deductible items must be deducted from that one return
Which one of the following statements concerning Joint Tenancy with right of survivorship is correct?
Ownership Interest must be equal
Which of the following transfers by a husband would qualify for the martial deduction?
Property left "to my wife for life, then to her estate"
In which of the following situations would property transferred at death receive a fully stepped up basis?
Property that passes to another because the descendent exercised a general power of appointment over the property under his or her will
All the following statements concerning the taxation of property transfers are correct EXCEPT
Property transferred at death that receives a stepped-up basis is not included in the decedents gross estate
All of the following statements concerning the federal estate tax are correct EXCEPT
Property transferred by contract or operation of law is not included in a decedent's estate for tax purposes
In which of the following situations has a transfer been completed for gift tax purposes?
Sally calls her stockbroker and tells the broker to purchase 100 shares of Enron and title them jointly to her and her husband with rights of survivorship
In which of the following situations would the retained interest be valued at zero for purposed of valuing the gift of the remainder interest?
Stock is transferred to a grantor-retained income trust (GRIT)
All the following statements concerning qualifying terminable interest property (QTIP) are correct EXCEPT
The rules of QTIP permit the surviving spouse to be given the right to direct that the property will go to the surviving spouse's children during the surviving spouses lifetime
Which of the following types of property is subject to probate?
Testamentary trust property
Which of the following statements concerning the federal estate tax is correct?
The Estate subject to tax includes not only property actually owned by the estate owner at the time of death but also property deemed to have been owned at the date of death
If Kevin transfers a valuable piece of property that he owns to his grandson Paul, which of the following statements concerning the possible application of the generation skipping transfer tax (GSTT) is correct?
The GSTT would apply only if the transfer avoids estate or gift tax one generation below Kevin
Which of the following statements concerning the responsibilities for trustee is correct?
The Trustee's duties and powers do not terminate until the termination of the trust
All the following arrangements can be used to proved an income interest to a noncharitable beneficiary for life with the remainder going to a charitable organization and qualifying for the charitable deduction EXCEPT
The decedent's property is placed in a charitable lead trust
In which of the following situations would a power held by the descendent at his or her death cause the entire value of the trust property to be included in the decedent's gross estate?
The descendent possess the power to appoint trust property to his or her estate
Which of the following statements concerning a general power of appointment is correct?
The gross estate includes the value of all property subject to a general power of appointment possessed by a descendent at the time of death
Life insurance can give rise to a taxable gift in all of the following circumstances EXCEPT
The insured purchases a policy on his or her life and names his or her daughter as the revocable beneficiary
Which of the following statements concerning the "kiddie tax" rules is correct?
The kiddie tax problem can be minimized by investing trust property in assets in which income will be deferred until the beneficiary reaches age 19 (or 24 if a full time student)
Which of the following adjustments is made in the amount of the adjusted gross state to calculate the taxable estate for federal estate tax purposes?
The marital and charitable deductions are subtracted from the adjusted gross estate
Which of the following statements concerning the income taxation of estates and their beneficiaries is correct?
The only beneficiaries who do not pay income tax on distributions of income from estates are those who receive specific bequests under the will that are to be paid in three installments or less
Sarah gave her sister, Janet, a gift of property valued at $200,000 that was subject to $120,000 of indebtedness. (Ignore the annual exclusion) All the following statements concerning gift tax valuation are correct EXCEPT
The property is valued for gift tax purposes on the date the gift is made or, alternatively 6 months after the date the gift is made
All of the following statements concerning transfers by will are correct EXCEPT
The property transfer becomes irrevocable once the will is properly signed, dated, and witnessed
In a year when the annual exclusion for gift taxes is $13,000, which of the following statements concerning the gift tax marital deduction is correct?
The recipient of the gift must be the donor's spouse at the time the gift is made and he or she must be a US citizen
Which of the following statements concerning a charitable remainder annuity trust (CRAT) is correct?
The remainder interest will be paid to or held for the benefit of a qualified charitable organization either at the death of the last income beneficiary or after a term of years not greater than 20
Which of the following statements concerning the use of Crummy powers with an irrevocable life insurance trust is correct?
The right to exercise the crummy powers must exist for a reasonable period of time each year
All or part of the income from a trust will be taxed to the grantor in all the following situations EXCEPT
The trustee holds the power to withhold income temporarily from a current income beneficiary
Which of the following is the primary reason to use a power of appointment?
To delegate a dispositive decision
All the following statements concerning the rule against perpetuities are correct EXCEPT
To determine whether the common-law rule is violated and thus whether the interest is invalid, it is necessary to wait until the interest actually vests
Which of the following statements concerning the income taxation of estates and trusts is correct?
Trusts and estates are subject to the same rate of income taxation
All of the following statements concerning estate planning for the elderly and incapacitated are correct EXCEPT
Trusts are especially useful because a trustee can manage assets in accordance with trust provisions and make personal health are decisions for an incompetent grantor
Which of the following statements concerning the generation-skipping transfer tax (GSTT) in 2011 is correct?
Tuition payments made to an educational institution by a grandmother on behalf of her grandson are excluded from both the fit tax and the GSTT
All the following statements concerning community property are correct EXCEPT
When a married couple moves from a community property state to a common law state, marital property acquired in the community jurisdiction becomes separate property
Which of the following statements concerning the valuation of property for federal estate tax purposes is correct?
When shares representing a minority interest in a closely held corporation are valued, a discount is often allowed
Which of the following statements concerning corporate buy-sell agreements is correct?
With a cross-purchase agreement, the sale of stock by a decedent shareholder's estate is treated as a sale or exchange, allowing the estate favorable capital gain treatment
All of the following types of wills are written EXCEPT
nuncupative wills
All the following are methods to void probate EXCEPT
using a self-proving will to transfer property owned by the decedent
All of the following statements concerning property held by tenancy in common are correct EXCEPT
when a tenant dies, his or her interest passes to the surviving tenant (s).
