Question 1

If a traditional IRA is subject to both estate and income taxes, a withdrawal by the heir constitutes income in respect of a decedent (IRD).

Accepted Answer

A) True 
 B)False

Question 2

In February 2015, Taylor sold real estate (adjusted basis of $200,000) for $600,000. Under the terms of the sale, the purchaser issued two notes of $300,000 each, payable annually. In January 2016 and when the notes are worth $560,000, Taylor gives the notes to her son. What, if any, are Taylor's tax consequences?

Accepted Answer

Taylor must recognize gain of $360,000 [

Question 3

At the time of Addison's death, he owned 70% of the stock in Robin Corporation, a closely held family business. Over the past five years, Robin has averaged annual profits of $400,000 in an industry where the typical after-tax rate of return is 9%. If the book value of the corporation's assets is $1,000,000 and goodwill exists, what might be a realistic value of the stock in Addison's gross estate?

Accepted Answer

A) $310,000 
B) $1,550,000 
C) $1,785,000 
D) $2,550,000 
E) None of the above. 
A) $310,000 
B) $1,550,000 
C) $1,785,000 
D) $2,550,000 
E) None of the above.

Question 4

In 1990, Mia, a resident of New Jersey, purchases realty for $600,000 listing title as "Mia and Ella, joint tenants with right of survivorship." In 2016, Mia predeceases Ella when the realty is worth $3,000,000. Ella's income tax basis in the property is:

Accepted Answer

A) $0. 
B) $300,000. 
C) $1,800,000. 
D) $3,000,000. 
E) $3,300,000. 
A) $0. 
B) $300,000. 
C) $1,800,000. 
D) $3,000,000. 
E) $3,300,000.

Question 5

Edgar creates a trust, life estate to Connie (age 46), remainder to Gene (age 18). In determining the value of the life estate, use the multiple given in the IRS valuation table for a person age 18.

Accepted Answer

A) True 
 B)False

Question 6

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:

Accepted Answer

A) A 16% interest in a partnership that has 36 partners. 
B) A 22% interest in a partnership that has 50 partners. 
C) A 10% interest in a partnership that has 48 partners. 
D) A sole proprietorship. 
E) All of the above. 
A) A 16% interest in a partnership that has 36 partners. 
B) A 22% interest in a partnership that has 50 partners. 
C) A 10% interest in a partnership that has 48 partners. 
D) A sole proprietorship. 
E) All of the above.

Question 7

Match each statement with the correct choice. Some choices may be used more than once or not used at all.
-Eliminates preferred stock from donor's gross estate.

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 8

When carrying out an estate freeze with family limited partnerships, the donors make gifts of the limited partnership interests but retain the general partnership interests.

Accepted Answer

A) True 
 B)False

Question 9

At the time of his death, Rex owned an RV. For valuation purposes, the RV should be included in his gross estate at the price a dealer in RVs would pay for the property.

Accepted Answer

A) True 
 B)False

Question 10

Jim makes a gift of property (basis of $800,000; fair market value of $600,000) to his wife, Molly. Six months later Molly dies, and under her will, the property (now worth $700,000) returns to Jim. Jim's income tax basis in the property now is $800,000.

Accepted Answer

A) True 
 B)False

Question 11

Funding an entity type of buy and sell agreement with life insurance requires fewer policies than in the case of the cross-purchase type.

Accepted Answer

A) True 
 B)False

Question 12

Which, if any, of the following procedures reduces both Ned's gross estate and probate estate?

Accepted Answer

A) Ned purchased a CD listing title as "Ned, payable on proof of death to Eileen." Eileen is Ned's niece. 
B) Four years ago, Ned named his wife as the designated beneficiary of his IRA. (Previously, Ned's estate was the designated beneficiary.) 
C) Using her funds, Ned's wife purchased real estate listing herself and Ned as "tenants by the entirety with right of survivorship." 
D) Four years ago, Ned made a gift of an insurance policy on his life to his daughter (the designated beneficiary). 
E) None of the above. 
A) Ned purchased a CD listing title as "Ned, payable on proof of death to Eileen." Eileen is Ned's niece. 
B) Four years ago, Ned named his wife as the designated beneficiary of his IRA. (Previously, Ned's estate was the designated beneficiary.) 
C) Using her funds, Ned's wife purchased real estate listing herself and Ned as "tenants by the entirety with right of survivorship." 
D) Four years ago, Ned made a gift of an insurance policy on his life to his daughter (the designated beneficiary). 
E) None of the above.

Question 13

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

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 14

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?

Accepted Answer

A) The FLP should be created just prior to death to avoid the appearance of being tax motivated. 
B) The FLP should be largely funded with personal assets (e.g., personal residence). 
C) When valuing the FLP interest, apply a large discount, to provide a safety zone for later bargaining with the IRS. 
D) Appraisals of the assets transferred to the FLP should be avoided, as they tend to limit the size of any discount claimed. 
E) None of the above. 
A) The FLP should be created just prior to death to avoid the appearance of being tax motivated. 
B) The FLP should be largely funded with personal assets (e.g., personal residence). 
C) When valuing the FLP interest, apply a large discount, to provide a safety zone for later bargaining with the IRS. 
D) Appraisals of the assets transferred to the FLP should be avoided, as they tend to limit the size of any discount claimed. 
E) None of the above.

Question 15

During 2016, it is possible for a surviving spouse to have an exclusion amount of as much as $10.9 million.

Accepted Answer

A) True 
 B)False

Question 16

Brad and Heather are husband and wife and live in New Mexico. Under Brad's will, his share of the community property passes to the children. Upon Brad's prior death, there will be a change in Heather's income tax basis in her half of the community property.

Accepted Answer

A) True 
 B)False

Question 17

Which, if any, of the following factors should reduce the value of a note receivable included in the gross estate of the holder?

Accepted Answer

A) The interest rate provided for is 8%. 
B) The note is not supported by collateral. 
C) The note is payable on demand. 
D) The note is forgiven by the decedent's will. 
E) None of the above. 
A) The interest rate provided for is 8%. 
B) The note is not supported by collateral. 
C) The note is payable on demand. 
D) The note is forgiven by the decedent's will. 
E) None of the above.

Question 18

A farm has a best use valuation of $3 million and a current use valuation of $1.2 million. If death occurs in 2016 and § 2032A is elected, the farm can be valued in the deceased owner's gross estate at $1.2 million.

Accepted Answer

A) True 
 B)False

Question 19

Bob and Paige are married and live in a common law state. Bob owns some real estate (fair market value of $560,000) which they would like to give to their five adult married children. The spouses of their children (e.g., son-in-law, daughter-in-law) are to be included in the gifts. Bob and Paige do not want to use any of their unified transfer tax credit. Assuming an annual exclusion for the Federal gift tax of $14,000, suggest a viable way to structure the transfer.

Accepted Answer

With ten donees and two donors, $280,000

Question 20

Rick and Gail are equal tenants in common in real estate. Upon Gail's prior death, Rick's basis in the real estate does not change.

Accepted Answer

A) True 
 B)False

If a traditional IRA is subject to both estate and income taxes, a withdrawal by the heir constitutes income in respect of a decedent (IRD).

In 1990, Mia, a resident of New Jersey, purchases realty for $600,000 listing title as "Mia and Ella, joint tenants with right of survivorship." In 2016, Mia predeceases Ella when the realty is worth $3,000,000. Ella's income tax basis in the property is:

Edgar creates a trust, life estate to Connie (age 46), remainder to Gene (age 18). In determining the value of the life estate, use the multiple given in the IRS valuation table for a person age 18.

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. -Eliminates preferred stock from donor's gross estate.

When carrying out an estate freeze with family limited partnerships, the donors make gifts of the limited partnership interests but retain the general partnership interests.

At the time of his death, Rex owned an RV. For valuation purposes, the RV should be included in his gross estate at the price a dealer in RVs would pay for the property.

Jim makes a gift of property (basis of $800,000; fair market value of $600,000) to his wife, Molly. Six months later Molly dies, and under her will, the property (now worth $700,000) returns to Jim. Jim's income tax basis in the property now is $800,000.

Funding an entity type of buy and sell agreement with life insurance requires fewer policies than in the case of the cross-purchase type.

Which, if any, of the following procedures reduces both Ned's gross estate and probate estate?

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

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?

During 2016, it is possible for a surviving spouse to have an exclusion amount of as much as $10.9 million.

Brad and Heather are husband and wife and live in New Mexico. Under Brad's will, his share of the community property passes to the children. Upon Brad's prior death, there will be a change in Heather's income tax basis in her half of the community property.

Which, if any, of the following factors should reduce the value of a note receivable included in the gross estate of the holder?

A farm has a best use valuation of $3 million and a current use valuation of $1.2 million. If death occurs in 2016 and § 2032A is elected, the farm can be valued in the deceased owner's gross estate at $1.2 million.

Rick and Gail are equal tenants in common in real estate. Upon Gail's prior death, Rick's basis in the real estate does not change.

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

If a traditional IRA is subject to both estate and income taxes, a withdrawal by the heir constitutes income in respect of a decedent (IRD).

In 1990, Mia, a resident of New Jersey, purchases realty for $600,000 listing title as "Mia and Ella, joint tenants with right of survivorship." In 2016, Mia predeceases Ella when the realty is worth $3,000,000. Ella's income tax basis in the property is:

Edgar creates a trust, life estate to Connie (age 46), remainder to Gene (age 18). In determining the value of the life estate, use the multiple given in the IRS valuation table for a person age 18.

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. -Eliminates preferred stock from donor's gross estate.

When carrying out an estate freeze with family limited partnerships, the donors make gifts of the limited partnership interests but retain the general partnership interests.

At the time of his death, Rex owned an RV. For valuation purposes, the RV should be included in his gross estate at the price a dealer in RVs would pay for the property.

Jim makes a gift of property (basis of $800,000; fair market value of $600,000) to his wife, Molly. Six months later Molly dies, and under her will, the property (now worth $700,000) returns to Jim. Jim's income tax basis in the property now is $800,000.

Funding an entity type of buy and sell agreement with life insurance requires fewer policies than in the case of the cross-purchase type.

Which, if any, of the following procedures reduces both Ned's gross estate and probate estate?

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

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?

During 2016, it is possible for a surviving spouse to have an exclusion amount of as much as $10.9 million.

Brad and Heather are husband and wife and live in New Mexico. Under Brad's will, his share of the community property passes to the children. Upon Brad's prior death, there will be a change in Heather's income tax basis in her half of the community property.

Which, if any, of the following factors should reduce the value of a note receivable included in the gross estate of the holder?

A farm has a best use valuation of $3 million and a current use valuation of $1.2 million. If death occurs in 2016 and § 2032A is elected, the farm can be valued in the deceased owner's gross estate at $1.2 million.

Rick and Gail are equal tenants in common in real estate. Upon Gail's prior death, Rick's basis in the real estate does not change.

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