HS-330 Online Practice Questions and Answers

In which of the following situations will the grantor be taxed on income from trust property.

-The grantor of a trust gives one of the trust beneficiaries the right to add or delete beneficiaries.

-

An adverse party to the grantor holds the power to determine the timing of trust distributions to the beneficiaries.

A.

Neither 1 nor 2

B.

2 only

C.

1 only

D.

Both 1 and 2

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.

A married man has two adult sons. His entire estate is in excess of $1,500,000 and consists entirely of probate assets. He wants to make certain that if he predeceases his wife she will receive all estate income as long as she lives, and the assets remaining at her death will pass equally to their two sons. He wants to pass all assets to this wife and sons as free of federal estate taxes as possible. To best accomplish these objectives, the man should include which of the following estate plans in his will?

A. Establish a marital deduction trust with a general power of appointment for half his estate and place the

remainder in a QTIP trust

B. Establish a QTIP trust for half his estate and bequeath the remainder to his wife

C. Establish a QTIP trust for his entire estate

D. Establish a bypass trust equal to the applicable exclusion amount and place the remainder of his estate in a QTIP trust

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

A. The transfer of property to the trust becomes a completed gift for gift tax purposes only at the termination of the grantor's retained interest term.

B. The trust is used as a device for shifting income tax on the current trust income to the remainderperson (s).

C. If the grantor dies before the retained interest term ends, the estate tax benefits are reduced.

D. The grantor retains control of the trust property until revocation or death.

Among the assets in a decedent's gross estate is stock in a closely held corporation that was left to a nephew. The interest passing to the nephew is required to bear the burden of all estate taxes and expenses. The relevant facts concerning this estate are:

-Adjusted gross estate $1,600,000

-Fair market value of stock in

-the closely held corporation 700,000

-Funeral expenses 30,000

-Executor's commission 50,000

-

Federal and state death tax 160,000

A.

$240,000

B.

$700,000

C.

$ 80,000

D.

0

Which of the following is (are) a permissible deduction from a decedent's gross estate to determine the decedent's adjusted gross estate?

1.

Expenses incurred for the benefit of individual heirs.

2.

Expenses incurred in the collection of estate assets.

A. Neither 1 nor 2

B. 2 only

C. 1 only

D. Both 1 and 2

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

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

Which of the following transactions is a taxable gift for federal gift tax purposes?

A. A mother purchased listed common stocks titling them in joint names with her daughter and the stocks have not yet been sold.

B. A grandmother purchased a U.S. savings bond that is registered as payable to her and her two grandchildren and the bond has not yet been surrendered for cash.

C. A man deeded real estate to his sister but did not record the deed nor did he deliver the deed to his sister.

D. A father made a deposit of $100,000 into a bank account titled jointly with his son, and the son has not yet made any withdrawals.

Requirements for property to qualify for the federal estate tax marital deduction include which of the following?

1.

The property interest must be includible in the decedent's gross estate.

2.

The property must pass in such manner that it will be includible in the surviving spouse's estate at death unless consumed or given away.

A. 1 only

B. Both 1 and 2

C. Neither 1 nor 2

D. 2 only

Believing that his death was imminent, a widower gave his son some real estate two years ago, and filed a timely gift tax return. The widower died on January 1st of this year. Additional facts are: Widower's basis in the real estate $200,000 Value of real estate when gifted 510,000 Value of real estate on date of death 1,000,000 Amount of gift tax paid by widower 159,500

Assuming the widower made no additional gifts to his son, all the following statements concerning this situation are correct EXCEPT:

A. The widower recognized no capital gain for income tax purposes at the time the gift was made.

B. The gift of the real estate is included in the calculation of the widower's federal estate tax as an adjusted taxable gift.

C. The son's income tax basis in the real estate is $1,000,000.

D. The gift tax paid is brought back into the widower's gross estate at $159,500.