Exam 19: Family Tax Planning

Mel's estate includes a number of notes receivable signed by his daughter, Tammy. These notes were issued by Tammy on different occasions when she obtained funds from Mel. The total face amount of these notes is $150,000. The notes are forgiven by Mel's will. How much, if any, regarding these notes should be included in Mel's gross estate?

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(Essay)

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Question 1

Correct Answer:

Verified

Unless the parties can prove otherwise, the notes are to be included in the holder's gross estate at their face amount. The fact that the decedent forgives the note in his will has no effect on valuation. To establish a lower valuation, Mel's executor might show a lower-than-market interest rate (or, no interest provided for at all) and a distant maturity date. To show that the notes are worthless (and, therefore, have no value) or partially worthless, look at Tammy's financial condition and the absence (or questionable value) of any assets pledged or collateral.

Which, if any, of the items listed below are valid factors utilized in valuing the stock in a closely held corporation?

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(Multiple Choice)

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Question 2

Correct Answer:

Verified

At the time of Elijah's death, he owned stock in Grey Corporation. The stock is traded on a local exchange with the most recent selling prices as follows. Presuming no alternate valuation date election, Elijah's gross estate should include a per share value of:

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(Multiple Choice)

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Question 3

Correct Answer:

Verified

For purposes of § 6166 (i.e., extension of estate tax payments relative to an interest in a closely held business), an interest in a closely held business does not include:

(Multiple Choice)

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Question 4

Match each statement with the correct choice. Some choices may be used more than once or not used at all -Surviving owners agree to purchase withdrawing owner's interest.

(Multiple Choice)

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Question 5

If a decedent's household goods are sold through public auction, the price received should be the valuation used for Federal estate tax purposes.

(True/False)

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Question 6

Eight months after Noah died, Audrey sells stock that she inherited from him. If the stock was sold for less than its value on the date of Noah's death, Audrey has a short-term capital loss.

(True/False)

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Question 7

Barney creates a trust, income payable to Madison for five years, remainder to Emma. Emma is Barney's daughter (and a single parent), and Madison is his 19-year old granddaughter. What might be the justification for this type of trust?

(Essay)

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Question 8

A farm has a best use valuation of $2.9 million and a current use valuation of $2 million. If § 2032A is elected, the farm can be valued in the deceased owner's gross estate at $2 million.

(True/False)

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Question 9

With respect to a stock interest in a closely held corporation, which, if any, of the following factors work to increase the gross estate value of the interest?

(Multiple Choice)

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Question 10

Match each statement with the correct choice. Some choices may be used more than once or not used at all -Decedent owned Roth IRA that has appreciated.

(Multiple Choice)

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Question 11

Abigail makes a gift of stock (basis of $600,000; fair market value of $1,200,000) to her son, Spencer. As a result of the transfer, Abigail paid a gift tax of $120,000. What is Spencer's income tax basis in the stock if the gift occurred after 1976?

(Short Answer)

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Question 12

Match each statement with the correct choice. Some choices may be used more than once or not used at all -No step-up in basis at death.

(Multiple Choice)

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Question 13

To prove successful in freezing the value of an interest in a family limited partnership (FLP), which, if any, of the following techniques is desirable?

(Multiple Choice)

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Question 14

Match each statement with the correct choice. Some choices may be used more than once or not used at all -Marital deduction allowed.

(Multiple Choice)

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Question 15

A disclaimer by a surviving spouse will generate additional estate tax because it reduces the amount of marital deduction allowed.

(True/False)

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Question 16

Jacob makes a gift of property (basis of $100,000; fair market value of $500,000) to his aunt, Mary. Ten months later and when the property is worth $550,000, Mary dies. Under Mary's will, the property passes to Isabella (Jacob's wife). Isabella's basis in the property is $550,000.

(True/False)

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Question 17

Buy and sell agreements can be used to help solve the estate tax valuation problems involved in the transfer by death of an interest in a small business.

(True/False)

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Question 18

Which of the following independent statements correctly reflects the valuation rules applicable to estate and gift taxes?

(Multiple Choice)

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Question 19

If depreciable property is passed by death, any depreciation recapture potential carries over to the heir.

(True/False)

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Question 20

Showing 1 - 20 of 145

Which, if any, of the items listed below are valid factors utilized in valuing the stock in a closely held corporation?

At the time of Elijah's death, he owned stock in Grey Corporation. The stock is traded on a local exchange with the most recent selling prices as follows. Presuming no alternate valuation date election, Elijah's gross estate should include a per share value of:

For purposes of § 6166 (i.e., extension of estate tax payments relative to an interest in a closely held business), an interest in a closely held business does not include:

Match each statement with the correct choice. Some choices may be used more than once or not used at all -Surviving owners agree to purchase withdrawing owner's interest.

If a decedent's household goods are sold through public auction, the price received should be the valuation used for Federal estate tax purposes.

Eight months after Noah died, Audrey sells stock that she inherited from him. If the stock was sold for less than its value on the date of Noah's death, Audrey has a short-term capital loss.

Barney creates a trust, income payable to Madison for five years, remainder to Emma. Emma is Barney's daughter (and a single parent), and Madison is his 19-year old granddaughter. What might be the justification for this type of trust?

A farm has a best use valuation of $2.9 million and a current use valuation of $2 million. If § 2032A is elected, the farm can be valued in the deceased owner's gross estate at $2 million.

With respect to a stock interest in a closely held corporation, which, if any, of the following factors work to increase the gross estate value of the interest?

Match each statement with the correct choice. Some choices may be used more than once or not used at all -Decedent owned Roth IRA that has appreciated.

Abigail makes a gift of stock (basis of $600,000; fair market value of $1,200,000) to her son, Spencer. As a result of the transfer, Abigail paid a gift tax of $120,000. What is Spencer's income tax basis in the stock if the gift occurred after 1976?

Match each statement with the correct choice. Some choices may be used more than once or not used at all -No step-up in basis at death.

To prove successful in freezing the value of an interest in a family limited partnership (FLP), which, if any, of the following techniques is desirable?

Match each statement with the correct choice. Some choices may be used more than once or not used at all -Marital deduction allowed.

A disclaimer by a surviving spouse will generate additional estate tax because it reduces the amount of marital deduction allowed.

Jacob makes a gift of property (basis of $100,000; fair market value of $500,000) to his aunt, Mary. Ten months later and when the property is worth $550,000, Mary dies. Under Mary's will, the property passes to Isabella (Jacob's wife). Isabella's basis in the property is $550,000.

Buy and sell agreements can be used to help solve the estate tax valuation problems involved in the transfer by death of an interest in a small business.

Which of the following independent statements correctly reflects the valuation rules applicable to estate and gift taxes?

If depreciable property is passed by death, any depreciation recapture potential carries over to the heir.

Understanding and Working With the Federal Tax Law

Corporations: Introduction and Operating Rules

Corporations: Special Situations

Corporations: Organization and Capital Structure

Corporations: Earnings Profits and Dividend Distributions

Corporations: Redemptions and Liquidations

Corporations: Reorganizations

Consolidated Tax Returns

Taxation of International Transactions

Partnerships: Formation, Operation, and Basis

Partnerships: Distributions, Transfer of Interests, and Terminations

S Corporations

Comparative Forms of Doing Business

Taxes on the Financial Statements

Exempt Entities

Multistate Corporate Taxation

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

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