Question 1

Presuming the § 2032A election is properly made,what value is included in the gross estate (in 2008)in each of the following independent situations?

Accepted Answer

Situation A is $2,000,000,as reduction cannot go below special use value.Situation B is $2,140,000 ($3,100,000 - $960,000).

Question 2

Giselle,a widow,has an extensive investment portfolio that has appreciated in value. Starting in 2008,she initiates a policy of making annual gifts of securities to her grandchildren who are attending college.Evaluate Giselle's policy in terms of the:
a.Federal gift and estate taxes.
b.Federal income tax.

Accepted Answer

a.Although the number of annual exclusions is being maximized,gift taxes or some of the amount could be avoided by making direct transfers to the educational institution-see the discussion of § 2503(e)in Chapter 17 .However,the use of § 2503(e)covers only tuition costs and would require Giselle to use cash (rather than securities). By making these gifts,Giselle is reducing her wealth,thereby cutting down on future estate taxes.
b.Giselle's major objective probably is to shift income tax consequences to lower bracket donees. If the grandchildren are below the 25% tax bracket (i.e.,they are in the 15% or 10% brackets),capital gains are taxed at a 0% rate (rather than Giselle's 15% rate). However,this result is successful only if the kiddie tax is avoided. By waiting until the grandchildren finish college,or,if earlier,age 24 has been reached,the kiddie tax no longer applies.

Question 3

Paul dies and leaves his traditional IRA to Evelyn.Which statement is correct?

Accepted Answer

A) Because of the step-up in basis received at death, the IRA causes no income tax consequences to Evelyn. 
B) The IRA is not included in Paul's gross estate. 
C) If Evelyn is Paul's daughter, she can roll over the IRA into her own IRA without causing any adverse tax consequences. 
D) If Evelyn is Paul's surviving spouse, she can defer any distributions from the IRA until she reaches age 70 1/2 without causing any adverse tax consequences. 
E) None of the above. 
A) Because of the step-up in basis received at death, the IRA causes no income tax consequences to Evelyn. 
B) The IRA is not included in Paul's gross estate. 
C) If Evelyn is Paul's daughter, she can roll over the IRA into her own IRA without causing any adverse tax consequences. 
D) If Evelyn is Paul's surviving spouse, she can defer any distributions from the IRA until she reaches age 70 1/2 without causing any adverse tax consequences. 
E) None of the above. D

Question 4

Match each statement with the correct choice. Some choices may be used more than once or not used at all.
a.Living trusts
b.Income in respect of a decedent (IRD)
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 (§ 2032A)
h.Recapture potential under §§ 1245 and 1250 eliminated
i.Alternate valuation date (§ 2032)
j.Election to split gifts (§ 2513)
k.No correct choice is given
-Reasonable cause will justify election.

Accepted Answer

The answer of Match each statement with the correct choice....

Question 5

Spencer makes a gift of stock in Swallow Corporation,which is not closely held but is traded in an over-the-counter market.The transactions involving this stock that occurred closest to the date of gift took place seven trading days before (mean selling price of $90)and five days after (mean selling price of $70).Determine the fair market value of the Swallow stock on the date of the gift.

Accepted Answer

$78.33,det

Question 6

Paula creates a trust,income payable to John (age 18)for 6 years,remainder to Elizabeth (age 39).In determining the value of Elizabeth's interest,use the multiple provided in the tables for a person age 45 (age 39 plus the 6-year intervening interest).

Accepted Answer

A) True 
 B)False

Question 7

In arriving at the valuation of assets for estate tax purposes,the geographic location of the property is to be disregarded.

Accepted Answer

A) True 
 B)False

Question 8

The sole objective of family tax planning is to minimize gift and estate taxes on transfers of property within the family unit.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

In connection with a traditional IRA that is transferred at death,comment on the tax implications of each of the following.
a.The beneficiary does nothing, and a distribution occurs.
b.The beneficiary retitles the IRA as a "retirement IRA."
c.The additional tax advantages enjoyed when the beneficiary is the surviving spouse.
d.The consequences of the IRA constituting income in respect of a decedent (IRD).

Accepted Answer

a.The IRA deferral ends,and the entire a

Question 12

In February 2007,Michelle sold real estate (adjusted basis of $300,000)for $800,000.Under the terms of the sale,the purchaser issued two notes of $400,000 each,payable annually.In January 2008 and when the notes are worth $760,000,Michelle gives the notes to her son.What,if any,are Michelle's tax consequences?

Accepted Answer

Michelle must recognize gain of $460,000

Question 13

Match each statement with a correct choice. Choices may be used more than once.
a.Increases the probate estate
b.Decreases the probate estate
c.Has no effect on the probate estate
-Brother purchased land listing ownership with decedent as tenants in common.

Accepted Answer

The answer of Match each statement with a correct choice....

Question 14

A decedent owned 15% of the voting stock of Falcon Corporation.Falcon has 43 shareholders.The decedent's estate can qualify for the § 6166 election.

Accepted Answer

A) True 
 B)False

Question 15

Which,if any,of the following items characterizes § 6166 (i.e.,extension of estate tax payments relative to an interest in a closely held business)?

Accepted Answer

A) No estate tax due need be paid for the first 5 years. 
B) No interest needs to be paid for the first 5 years. 
C) In satisfying the more-than-35% test for qualification, all interests in closely held businesses can be aggregated. 
D) The 2% rate of interest applies to the total amount of estate tax value. 
E) None of the above. 
A) No estate tax due need be paid for the first 5 years. 
B) No interest needs to be paid for the first 5 years. 
C) In satisfying the more-than-35% test for qualification, all interests in closely held businesses can be aggregated. 
D) The 2% rate of interest applies to the total amount of estate tax value. 
E) None of the above.

Question 16

A discount for valuation purposes is allowed when the stock involved represents a minority interest.

Accepted Answer

A) True 
 B)False

Question 17

In April 2007,Austin makes a gift of real estate (basis of $200,000; fair market value $600,000)to his aunt.After the gift,the aunt makes $55,000 worth of capital improvements to the property.The aunt dies in March 2008,when the property is worth $640,000.Under the aunt's will,the realty passes to Kinsey (Austin's wife).Kinsey's income tax basis in the property is:

Accepted Answer

A) $695,000. 
B) $640,000. 
C) $255,000. 
D) $200,000. 
E) None of the above. 
A) $695,000. 
B) $640,000. 
C) $255,000. 
D) $200,000. 
E) None of the above.

Question 18

Derrick dies,and under the terms of his will,all of his property passes outright to Dion (Derrick's surviving wife).Under these circumstances,there is no need for Derrick's executor to make a QTIP election.

Accepted Answer

A) True 
 B)False

Question 19

In June 2007,Becky makes a gift of securities (basis $412,000; fair market value $812,000)to her uncle,upon which a gift tax of $40,000 is paid.The uncle dies in July 2008,when the securities are worth $900,000.Under the terms of the uncle's will,the securities return to Becky.Becky's income tax basis in the securities is:

Accepted Answer

A) $940,000. 
B) $900,000. 
C) $452,000. 
D) $432,000. 
E) None of the above. 
A) $940,000. 
B) $900,000. 
C) $452,000. 
D) $432,000. 
E) None of the above.

Question 20

William and Madison are husband and wife.Fifteen years ago,they purchased real estate for $200,000.Madison dies first in 2008 when the property is worth $1,000,000.Assuming the property passes to William,what is his income tax basis under the following ownership assumptions?
a.A tenancy by the entirety is involved.
b.Community property is involved.
c.Why are the results different?

Accepted Answer

a.$600,000 [$100,000 (William's cost bas

Presuming the § 2032A election is properly made,what value is included in the gross estate (in 2008)in each of the following independent situations?

Paul dies and leaves his traditional IRA to Evelyn.Which statement is correct?

Paula creates a trust,income payable to John (age 18)for 6 years,remainder to Elizabeth (age 39).In determining the value of Elizabeth's interest,use the multiple provided in the tables for a person age 45 (age 39 plus the 6-year intervening interest).

In arriving at the valuation of assets for estate tax purposes,the geographic location of the property is to be disregarded.

The sole objective of family tax planning is to minimize gift and estate taxes on transfers of property within the family unit.

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

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

Match each statement with a correct choice. Choices may be used more than once. a.Increases the probate estate b.Decreases the probate estate c.Has no effect on the probate estate -Brother purchased land listing ownership with decedent as tenants in common.

A decedent owned 15% of the voting stock of Falcon Corporation.Falcon has 43 shareholders.The decedent's estate can qualify for the § 6166 election.

Which,if any,of the following items characterizes § 6166 (i.e.,extension of estate tax payments relative to an interest in a closely held business)?

A discount for valuation purposes is allowed when the stock involved represents a minority interest.

Derrick dies,and under the terms of his will,all of his property passes outright to Dion (Derrick's surviving wife).Under these circumstances,there is no need for Derrick's executor to make a QTIP election.

Understanding and Working With the Federal Tax Law

Corporations: Introduction and Operating Rules

Corporations: Special Situations

Corporations: Organization and Capital Structure

Corporations: Earnings and 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

Exempt Entities

Multistate Corporate Taxation

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters

Exam 18: Family Tax Planning

Presuming the § 2032A election is properly made,what value is included in the gross estate (in 2008)in each of the following independent situations?

Paul dies and leaves his traditional IRA to Evelyn.Which statement is correct?

Paula creates a trust,income payable to John (age 18)for 6 years,remainder to Elizabeth (age 39).In determining the value of Elizabeth's interest,use the multiple provided in the tables for a person age 45 (age 39 plus the 6-year intervening interest).

In arriving at the valuation of assets for estate tax purposes,the geographic location of the property is to be disregarded.

The sole objective of family tax planning is to minimize gift and estate taxes on transfers of property within the family unit.

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

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

Match each statement with a correct choice. Choices may be used more than once. a.Increases the probate estate b.Decreases the probate estate c.Has no effect on the probate estate -Brother purchased land listing ownership with decedent as tenants in common.

A decedent owned 15% of the voting stock of Falcon Corporation.Falcon has 43 shareholders.The decedent's estate can qualify for the § 6166 election.

Which,if any,of the following items characterizes § 6166 (i.e.,extension of estate tax payments relative to an interest in a closely held business)?

A discount for valuation purposes is allowed when the stock involved represents a minority interest.

Derrick dies,and under the terms of his will,all of his property passes outright to Dion (Derrick's surviving wife).Under these circumstances,there is no need for Derrick's executor to make a QTIP election.

Understanding and Working With the Federal Tax Law

Corporations: Introduction and Operating Rules

Corporations: Special Situations

Corporations: Organization and Capital Structure

Corporations: Earnings and 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

Exempt Entities

Multistate Corporate Taxation

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters