HS330 Online Practice Questions and Answers

Which of the following types of partial interests in property may be allowed a charitable deduction for estate tax purposes?

1.

A remainder interest in the donor vacation home

2.

A testamentary gift of a percentage of a decedent entire interest in property held in trust

A. Neither 1 nor 2

B. Both 1 and 2

C. 1 only

D. 2 only

A wife owns a $100,000 life insurance policy on her husband's life. She has named her son the revocable beneficiary. Which of the following statements concerning the life insurance is (are) correct?

1.

At the husband's death, the interpolated terminal reserve of the policy is a gift to the son.

2.

The annual increase in the cash value is a gift to the son.

A. Neither 1 nor 2

B. 1 only

C. 2 only

D. Both 1 and 2

The executor of an estate has a choice of waiving the executor's fee. Factors that should be considered by the executor in making this choice include all the following EXCEPT

A. the estate tax bracket of the estate

B. the income tax brackets of the other beneficiaries

C. whether the executor is otherwise a beneficiary of the estate

D. the income tax bracket of the executor

All the following items will be included in a decedent's gross estate at their date of death value for federal estate tax purposes EXCEPT

A. a no-refund life annuity payable to the decedent that was purchased by the decedent from a life insurance company

B. a gratuitous lifetime transfer of property in which the decedent retained the power to revoke the transfer with the consent of another person

C. a gratuitous transfer of property taking effect at the decedent's death

D. a gratuitous lifetime transfer in which the decedent retained a reversionary interest on the date of death equivalent to more than 5 percent of the value of the property

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

A. Instead of parents paying an outside executive $60,000, a son runs their business for 8 months without charging a fee.

B. The parents of a married son permit their son and his family to use a summer cottage that rents for $3,000 per month on a rent-free basis.

C. A father cancels a $50,000 note his daughter gave him when he made a loan to her 2 years ago.

D. A father gives his 19-year-old daughter a note promising to give her his Rolls Royce when she reaches the age of 21.

All the following statements concerning a typical pour-over trust are correct EXCEPT:

A. It is a device to consolidate all a decedent's assets to simplify administration.

B. Properly drawn, it eliminates the need to file a federal estate tax return.

C. The trust is created during the lifetime of the grantor.

D. The trust is revocable during the lifetime of the grantor.

A married man is the sole owner of a small business with an estate tax value of $500,000. In addition, he and his wife own an office building as joint tenants with right of survivorship which they purchased five years ago. The building has an estate tax value of $1,500,000. They are considering dissolving the joint tenancy and retitling the building in the name of the husband as sole owner. Which of the following statements concerning this action is (are) correct?

1.

If the husband dies first, it would be easier to qualify his estate for a Section 303 redemption of his business interest.

2.

If the husband dies first, the probate costs of his estate could be increased.

A. 2 only

B. 1 only

C. Neither 1 nor 2

D. Both 1 and 2

All the following statements concerning installment sale tax treatment are correct EXCEPT:

A. The seller must pay income tax on the interest portion of each installment.

B. If the seller has a gain, the basis portion of each installment is received tax free.

C. Installments due after the seller's death are excludible from the seller's gross estate.

D. The entire purchase price may be fully paid in any one taxable year other than the year in which the property is sold.

Tax benefits of making lifetime gifts in excess of the gift tax annual exclusion include which of the following?

1.

The gift tax paid on a gift made more than 3 years prior to the death of the donor is not brought back into the donor's estate.

2.

Such gifts make use of the lifetime applicable credit amount against gift taxes which is wasted if the property is retained until the donor's death.

A. 1 only

B. Both 1 and 2

C. 2 only

D. Neither 1 nor 2

Which of the following members of the estate planning team is responsible for assuring that the client's intentions are expressed in documents that will carry out the final plan?

A. The lawyer

B. The investment counselor

C. The trust officer

D. The life underwriter