HS-330 Online Practice Questions and Answers

A father wants to accumulate funds for his 12-year-old son's college education. On the advice of his attorney, the father establishes an IRC Section 2503(c) trust and funds it with annual gifts. All the following statements concerning this arrangement are correct EXCEPT:

A. In the event of the son's death prior to age 21, trust assets must either be payable to the son's estate or be subject to a general power of appointment held by the son.

B. The father's annual gift tax exclusion must be reduced by any amount used to pay college tuition costs.

C. The trust must be irrevocable.

D. Any accumulated income and all trust principal must be available for distribution to the son when he attains age 21.

All the following statements concerning real property ownership by married couples as joint tenants with right of survivorship are correct EXCEPT:

A. Jointly held property between spouses does not pass through the probate estate of the first spouse to die.

B. In common-law states the total value of the property receives a stepped-up tax basis in the estate of the first spouse to die.

C. All benefits of ownership remain available to the surviving spouse without interruption during the administration of the deceased spouse's estate.

D. The deceased spouse's interest in the property qualifies for the marital deduction since it passes outright to the surviving spouse.

All the following statements concerning an entity-purchase buy-sell agreement for a partnership are correct EXCEPT:

A. The partnership, in effect, liquidates the interest held by the decedent-partner's estate.

B. The partnership makes payments to the decedent-partner's estate to liquidate the partnership interest held by the estate.

C. It is the surviving partners who purchase the decedent's business interest so that the partnership can afford to pay the decedent's estate.

D. Both the partners and the partnership are parties to the agreement that provides for business continuation.

All the following statements concerning a federal estate tax deduction for a bequest or gift to a qualified charity are correct EXCEPT:

A. The amount of a charitable deduction may not exceed 50 percent of a decedent's adjusted gross estate.

B. An estate may deduct the value of the remainder interest in a charitable remainder trust.

C. A life insurance policy that was assigned to a charity as a gift less than 3 years prior to the insured's death qualifies for a charitable deduction.

D. The amount of a charitable deduction is reduced by any taxes and administrative expenses chargeable against the bequest.

An executor elects to value the assets of the estate at the alternative valuation date 6 months after death. Which of the following statements concerning the estate tax value of assets included in this estate is correct?

A. Property distributed under the will before the alternate valuation date is valued at the date of death.

B. Property that has increased in value since the date of death may be valued at the date of death if the executor so elects.

C. An annuity included in the gross estate that diminishes with the mere passage of time is includible at the date of death value.

D. Property sold before the alternate valuation date is valued at the alternate valuation date.

Important factors in assessing liquidity needs in estate planning include which of the following?

1.

The types of assets that comprise the estate

2.

The date of drafting the will

A. Neither 1 nor 2

B. 2 only

C. Both 1 and 2

D. 1 only

Which of the following factors is (are) used to make a choice between having an entity-purchase or cross-purchase partnership buy-sell agreement?

1.

The cost basis of the partners' business interests.

2.

The amount of the partners?individual personal net worths.

A. 2 only

B. 1 only

C. Both 1 and 2

D. Neither 1 nor 2

Which of the following statements concerning the imposition of state death taxes on property owned by a decedent is (are) correct?

1.

Real estate must be taxed in the state where the decedent was domiciled.

2.

Intangible personal property is generally taxed in the state where the decedent was domiciled.

A. 2 only

B. Neither 1 nor 2

C. Both 1 and 2

D. 1 only

Which of the following statements concerning a grantor-retained annuity trust (GRAT) is (are) correct?

1.

The grantor is taxed on trust income during the retained term.

2.

The grantor makes an irrevocable transfer to the remainderperson(s) when the trust is created.

A. Neither 1 nor 2

B. 2 only

C. 1 only

D. Both 1 and 2

Which of the following statements concerning ownership of property under a tenancy by the entirety is correct?

A. The property will be in the probate estate of the first joint tenant to die.

B. One tenant can freely transfer his or her property interest to a third person.

C. It is a form of property ownership that applies only to personal property.

D. It is a form of property ownership available only to married persons.