Question 1

In a typical "estate freeze" involving stock:

Accepted Answer

A) The common stock is subject to the gift tax but not to the estate tax. 
B) The preferred stock is subject to the gift tax but not to the estate tax. 
C) The owner makes a gift of both common and preferred stock. 
D) The common stock is subject to both the gift tax and the estate tax. 
E) None of the above. 
A) The common stock is subject to the gift tax but not to the estate tax. 
B) The preferred stock is subject to the gift tax but not to the estate tax. 
C) The owner makes a gift of both common and preferred stock. 
D) The common stock is subject to both the gift tax and the estate tax. 
E) None of the above. A

Question 2

If a stock redemption is to be carried out, a cross-purchase type of buy and sell agreement cannot be involved.

Accepted Answer

A) True 
 B)False  True

Question 3

Match each statement with the correct choice. Some choices may be used more than once or not used at all.
-Transfer by death of depreciable property.

Accepted Answer

A) Revocable trusts 
B) Income in respect of a decedent (IR
D)  
C) Conservation easement 
D) Discretionary extension of time to pay estate tax (§ 6161) 
E) Estate freeze-corporations
F)Extension of time involving interest in closely held business (§ 6166)
G)Special use valuation as to certain realty (§ 2032
A) 
H)Depreciation recapture potential eliminated
I)Alternate valuation date (§ 2032)
J)Election to split gifts (§ 2513)
K)No correct choice is given 
A) Revocable trusts 
B) Income in respect of a decedent (IR
D)  
C) Conservation easement 
D) Discretionary extension of time to pay estate tax (§ 6161) 
E) Estate freeze-corporations
F)Extension of time involving interest in closely held business (§ 6166)
G)Special use valuation as to certain realty (§ 2032
A) 
H)Depreciation recapture potential eliminated
I)Alternate valuation date (§ 2032)
J)Election to split gifts (§ 2513)
K)No correct choice is given H

Question 4

One of the advantages of an estate freeze is that the preferred stock is not included in the gross estate of the donor.

Accepted Answer

A) True 
 B)False

Question 5

Which, if any, of the following statements correctly reflects the operational rules under § 2032A ("special use" valuation)?

Accepted Answer

A) The § 2032A election is available for gift tax situations. 
B) The § 2032A election permits the valuation of qualifying property at its "most suitable" use value. 
C) In meeting the 50% test, the qualifying property is considered at its "special" use value. 
D) If § 2032A is elected, only a sale of the qualifying property within the next 10 years will cause recapture. 
E) None of the above. 
A) The § 2032A election is available for gift tax situations. 
B) The § 2032A election permits the valuation of qualifying property at its "most suitable" use value. 
C) In meeting the 50% test, the qualifying property is considered at its "special" use value. 
D) If § 2032A is elected, only a sale of the qualifying property within the next 10 years will cause recapture. 
E) None of the above.

Question 6

In an estate freeze, the preferred stock is taxed twice-first upon the gift, and second when the donor dies.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

By maximizing the marital deduction, any estate tax is postponed until the death of the surviving spouse.

Accepted Answer

A) True 
 B)False

Question 9

At the time of his death, Fred held some notes receivable for loans he made to his two daughters and the payment of which he forgives in his will. The amount to be included in Fred's gross estate as to these notes is not affected by his forgiveness.

Accepted Answer

A) True 
 B)False

Question 10

Passing installment notes by death will not avoid any income tax on the deferred gain.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) Step-up in basis 
B) Step-down in basis 
C) Gift of installment notes receivable 
D) Gift of property that has § 1245 or § 1250 potential for recapture of depreciation 
E) Donor's basis on date of gift (appreciated property given, no gift tax due)
F)The amount of the deceased spouse's taxable estate does not change
G)Fair market value on date of gift
H)Expected surviving spouse is in good health and 10 years younger
I)No income tax consequences to the beneficiary
J)Income in respect of a decedent (IR
D) 
K)No correct choice is given 
A) Step-up in basis 
B) Step-down in basis 
C) Gift of installment notes receivable 
D) Gift of property that has § 1245 or § 1250 potential for recapture of depreciation 
E) Donor's basis on date of gift (appreciated property given, no gift tax due)
F)The amount of the deceased spouse's taxable estate does not change
G)Fair market value on date of gift
H)Expected surviving spouse is in good health and 10 years younger
I)No income tax consequences to the beneficiary
J)Income in respect of a decedent (IR
D) 
K)No correct choice is given

Question 12

Match each statement with the correct choice. Some choices may be used more than once or not used at all.
-Corporation agrees to redeem withdrawing shareholder's stock.

Accepted Answer

A) Use IRS valuation tables 
B) Blockage rule 
C) Special use value 
D) Best or most suitable use value 
E) Cost of going public
F)Replacement cost of a comparable contract
G)Portion of a deceased spouse's share of community property that passes to a surviving spouse
H)Cross-purchase buy and sell agreement
I)Entity buy and sell agreement
J)Bypass amount
K)No correct choice is given 
A) Use IRS valuation tables 
B) Blockage rule 
C) Special use value 
D) Best or most suitable use value 
E) Cost of going public
F)Replacement cost of a comparable contract
G)Portion of a deceased spouse's share of community property that passes to a surviving spouse
H)Cross-purchase buy and sell agreement
I)Entity buy and sell agreement
J)Bypass amount
K)No correct choice is given

Question 13

At the time of her death in 2016, Carol owns 60% of the stock in Drab Corporation, with the balance of the stock held by family members. Drab Corporation's total profits for the past five years are $3,200,000, and the book value of its stock is $2,400,000. If 8.5% is an appropriate after-tax rate of return and goodwill exists, what is a possible value for the stock to be included in Carol's gross estate?

Accepted Answer

None

Question 14

Under Cindy's will, her share of their community property passes to Van, her surviving spouse. Cindy's property is subject to probate.

Accepted Answer

A) True 
 B)False

Question 15

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?

Accepted Answer

Probably to help pay for Madis

Question 16

A qualifying heir can make the § 2032A special valuation election only if he is not sure that he will keep the property for the full 10 years.

Accepted Answer

A) True 
 B)False

Question 17

Match each statement with the correct choice. Some choices may be used more than once or not used at all.
-Can postpone the payment of any estate tax for 5 years from due date of the return.

Accepted Answer

A) Revocable trusts 
B) Income in respect of a decedent (IR
D)  
C) Conservation easement 
D) Discretionary extension of time to pay estate tax (§ 6161) 
E) Estate freeze-corporations
F)Extension of time involving interest in closely held business (§ 6166)
G)Special use valuation as to certain realty (§ 2032
A) 
H)Depreciation recapture potential eliminated
I)Alternate valuation date (§ 2032)
J)Election to split gifts (§ 2513)
K)No correct choice is given 
A) Revocable trusts 
B) Income in respect of a decedent (IR
D)  
C) Conservation easement 
D) Discretionary extension of time to pay estate tax (§ 6161) 
E) Estate freeze-corporations
F)Extension of time involving interest in closely held business (§ 6166)
G)Special use valuation as to certain realty (§ 2032
A) 
H)Depreciation recapture potential eliminated
I)Alternate valuation date (§ 2032)
J)Election to split gifts (§ 2513)
K)No correct choice is given

Question 18

Under proper circumstances, a disclaimer by an heir may increase the charitable deduction allowed a decedent.

Accepted Answer

A) True 
 B)False

Question 19

After a prolonged illness, Avery has been diagnosed as having a terminal illness, such that she will die in less than a year. Which of the following procedures best improves her Federal gift and estate tax situation?

Accepted Answer

A) She issues large notes made payable to loved ones to increase her future § 2053 deductions for claims against the estate. 
B) She makes gifts of her life insurance. 
C) She makes enough taxable gifts to keep from losing any of her $5 million gift tax exemption equivalent. 
D) She makes a donation of cash to the building fund of her church. 
E) None of the above. 
A) She issues large notes made payable to loved ones to increase her future § 2053 deductions for claims against the estate. 
B) She makes gifts of her life insurance. 
C) She makes enough taxable gifts to keep from losing any of her $5 million gift tax exemption equivalent. 
D) She makes a donation of cash to the building fund of her church. 
E) None of the above.

Question 20

Match each statement with the correct choice. Some choices may be used more than once or not used at all.
-A gift will cause income tax consequences to the donor.

Accepted Answer

A) Step-up in basis 
B) Step-down in basis 
C) Gift of installment notes receivable 
D) Gift of property that has § 1245 or § 1250 potential for recapture of depreciation 
E) Donor's basis on date of gift (appreciated property given, no gift tax due)
F)The amount of the deceased spouse's taxable estate does not change
G)Fair market value on date of gift
H)Expected surviving spouse is in good health and 10 years younger
I)No income tax consequences to the beneficiary
J)Income in respect of a decedent (IR
D) 
K)No correct choice is given 
A) Step-up in basis 
B) Step-down in basis 
C) Gift of installment notes receivable 
D) Gift of property that has § 1245 or § 1250 potential for recapture of depreciation 
E) Donor's basis on date of gift (appreciated property given, no gift tax due)
F)The amount of the deceased spouse's taxable estate does not change
G)Fair market value on date of gift
H)Expected surviving spouse is in good health and 10 years younger
I)No income tax consequences to the beneficiary
J)Income in respect of a decedent (IR
D) 
K)No correct choice is given

In a typical "estate freeze" involving stock:

If a stock redemption is to be carried out, a cross-purchase type of buy and sell agreement cannot be involved.

Match each statement with the correct choice. Some choices may be used more than once or not used at all. -Transfer by death of depreciable property.

One of the advantages of an estate freeze is that the preferred stock is not included in the gross estate of the donor.

Which, if any, of the following statements correctly reflects the operational rules under § 2032A ("special use" valuation)?

In an estate freeze, the preferred stock is taxed twice-first upon the gift, and second when the donor dies.

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

By maximizing the marital deduction, any estate tax is postponed until the death of the surviving spouse.

At the time of his death, Fred held some notes receivable for loans he made to his two daughters and the payment of which he forgives in his will. The amount to be included in Fred's gross estate as to these notes is not affected by his forgiveness.

Passing installment notes by death will not avoid any income tax on the deferred gain.

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

Match each statement with the correct choice. Some choices may be used more than once or not used at all. -Corporation agrees to redeem withdrawing shareholder's stock.

Under Cindy's will, her share of their community property passes to Van, her surviving spouse. Cindy's property is subject to probate.

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 qualifying heir can make the § 2032A special valuation election only if he is not sure that he will keep the property for the full 10 years.

Match each statement with the correct choice. Some choices may be used more than once or not used at all. -Can postpone the payment of any estate tax for 5 years from due date of the return.

Under proper circumstances, a disclaimer by an heir may increase the charitable deduction allowed a decedent.

After a prolonged illness, Avery has been diagnosed as having a terminal illness, such that she will die in less than a year. Which of the following procedures best improves her Federal gift and estate tax situation?

Match each statement with the correct choice. Some choices may be used more than once or not used at all. -A gift will cause income tax consequences to the donor.

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

Multi-State Corporate Taxations

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters

Exam 19: Family Tax Planning

In a typical "estate freeze" involving stock:

If a stock redemption is to be carried out, a cross-purchase type of buy and sell agreement cannot be involved.

Match each statement with the correct choice. Some choices may be used more than once or not used at all. -Transfer by death of depreciable property.

One of the advantages of an estate freeze is that the preferred stock is not included in the gross estate of the donor.

Which, if any, of the following statements correctly reflects the operational rules under § 2032A ("special use" valuation)?

In an estate freeze, the preferred stock is taxed twice-first upon the gift, and second when the donor dies.

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

By maximizing the marital deduction, any estate tax is postponed until the death of the surviving spouse.

At the time of his death, Fred held some notes receivable for loans he made to his two daughters and the payment of which he forgives in his will. The amount to be included in Fred's gross estate as to these notes is not affected by his forgiveness.

Passing installment notes by death will not avoid any income tax on the deferred gain.

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

Match each statement with the correct choice. Some choices may be used more than once or not used at all. -Corporation agrees to redeem withdrawing shareholder's stock.

Under Cindy's will, her share of their community property passes to Van, her surviving spouse. Cindy's property is subject to probate.

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 qualifying heir can make the § 2032A special valuation election only if he is not sure that he will keep the property for the full 10 years.

Match each statement with the correct choice. Some choices may be used more than once or not used at all. -Can postpone the payment of any estate tax for 5 years from due date of the return.

Under proper circumstances, a disclaimer by an heir may increase the charitable deduction allowed a decedent.

After a prolonged illness, Avery has been diagnosed as having a terminal illness, such that she will die in less than a year. Which of the following procedures best improves her Federal gift and estate tax situation?

Match each statement with the correct choice. Some choices may be used more than once or not used at all. -A gift will cause income tax consequences to the donor.

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

Multi-State Corporate Taxations

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters