HS330 Online Practice Questions and Answers

Which of the following statements concerning state death tax exemptions and tax rates for classes of estate beneficiaries is (are) correct?

1.

Exemptions are determined by the closeness of the beneficiary's blood relationship to the decedent.

2.

Closest relatives receive the lowest tax rates and lowest exemption amounts.

A. 1 only

B. Neither 1 nor 2

C. Both 1 and 2

D. 2 only

Which of the following statements concerning the inclusion and valuation of all or part of a commercial annuity in the estate of an annuitant is correct?

A. A life annuity with a period certain is includible to the extent of the present value of any remaining guaranteed payments.

B. A joint and survivor annuity is includible to the extent that the survivor paid the purchase price of the contract.

C. An annuity is includible to the extent of the value determined by the special 10-year averaging rule.

D. If the executor elects the alternate valuation date, an annuity is includible at its replacement cost 6 months after death.

To determine whether a taxable gift has been made, the Treasury Regulations require that there must initially be a definite finding that the

A. donor was a close friend or a relative of the donee

B. property was transferred for less than an adequate and full consideration in money or money's worth

C. transferor's actual state of mind was such that he intended to make a gift

D. property transferred was real property or tangible personal property

All the following will be brought back into the donor's gross estate for federal estate tax purposes EXCEPT

A. a gratuitous transfer of real property to a revocable inter vivos trust

B. an outright, gratuitous transfer of real property in contemplation of death

C. the gift taxes paid last year on a gratuitous transfer of real property

D. a gratuitous transfer of real property with a reserved right to use and enjoy it for life

Which of the following statements concerning estates and trusts is (are) correct?1. Both estates and trusts come into being by operation of law. 2. The personal representative of an estate and the trustee have similar fiduciary responsibilities.

A. Both 1 and 2

B. 1 only

C. Neither 1 nor 2

D. 2 only

When the owner of a closely held business dies, the payment of a portion of the federal estate tax may be deferred for a period of several years if the estate otherwise qualifies under the provisions of IRC Section 6166. Which of the following statements concerning this deferral of federal estate tax is correct?

A. To qualify for the tax deferral, the closely held business must represent more than 50 percent of the value of the decedent's adjusted gross estate.

B. Under certain circumstances, the estate will forfeit its right to tax deferral, and all the remaining unpaid estate tax will become due and payable immediately.

C. The interest on the unpaid estate tax is payable over the first 10 years, after which the tax plus interest on the balance is payable in equal installments for the last 5 years.

D. The interest rate on the deferred tax is determined by the prime rate in effect on the date of death.

A man recently died with only probate assets. Under the terms of his will, he left his entire probate estate outright to his wife. The following are relevant facts about the estate:

-Gross estate $2,000,000

-Estate administration expenses 50,000

-Debts of decedent 200,000

-

Allowable funeral expenses 5,000

A.

$1,750,000

B.

$1,745,000

C.

$1,795,000

D.

$1,800,000

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

A. If the joint tenants are two brothers and each contributed one half the property's purchase price, only one half the property's value will be in the estate of the first brother to die if his executor proves that the other brother contributed half of the purchase price.

B. If the joint tenants are husband and wife, because this is a qualified joint interest, one half the value of the property will be in the estate of the first spouse to die regardless of which spouse contributed to the purchase price.

C. If the joint tenants are brother and sister, no portion of the value of the property will be in the sister's estate if she dies first provided her executor proves that the brother contributed all the funds.

D. If three sisters inherited property as joint tenants with right of survivorship, the entire value of the property will be in the estate of the first sister to die.

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.

A man established and funded an irrevocable trust and named a bank as trustee. All income from the trust is to be paid to his four grandchildren. Which of the following powers retained by the grantor of the trust will cause all or a portion of the trust assets to be includible in his gross estate for federal estate tax purposes?

1.

The power to add principal to the trust

2.

The power to vary the amounts of trust income paid to each grandchild

A. Neither 1 nor 2

B. Both 1 and 2

C. 1 only

D. 2 only