Question 1

Cost and time are usually saved by passing ownership to out-of-state real estate by gift rather than by death.

Accepted Answer

A) True 
 B)False  True

Question 2

Robert and Kristen are husband and wife.Ten years ago,they purchased stock for $500,000.Kristen dies first in 2012 when the property is worth $1,000,000.Assuming the property passes to Robert,what is his income tax basis under the following ownership assumptions?

Accepted Answer

The answer of Robert and Kristen are husband and wife.Ten...

Question 3

Brooke wants to donate a parcel of land (basis of $50,000;fair market value of $200,000)to her church,which it plans to use for a new parsonage.However,since Brooke wants to recover her capital investment,she plans to sell the property to the church for $50,000.Comment on the tax consequences of this proposed sale.

Accepted Answer

Under § 1011(b),a bargain sale to charity carries income tax consequences.The portion of the basis to be allocated to the selling price is determined by dividing the sale price by the fair market value.Thus,$50,000/$200,000 equals 25%,or a basis of $12,500 (25% ´ $50,000).The recognized gain becomes $37,500 [$50,000 (selling price)- $12,500 (allocated basis)].A charitable deduction of $150,000 [$200,000 (fair market value)- $50,000 (consideration received)] also results.

Question 4

Clancy and Maureen are husband and wife and have always lived in a community property state.When Clancy learns that he is terminally ill,he gives to Maureen all of his share of the community investments that have declined in value.Why?

Accepted Answer

By making the gift,Clancy preserves the

Question 5

Andrew makes a gift of securities (basis of $1,100,000;fair market value of $800,000)to his son,Carl.As a result of the transfer,Andrew paid a gift tax of $80,000.What is Carl's income tax basis in the securities if the gift occurred in 2012?

Accepted Answer

Basis for gain is $1,100,000 a

Question 6

In 2010,Pam makes a gift of land (basis of $313,000;fair market value of $913,000)to her granddaughter,Tracy.As a result of the transfer,Pam paid a gift tax of $45,000.Tracy's income tax basis in the land is:

Accepted Answer

A) $358,000. 
B) $343,000. 
C) $328,000. 
D) $313,000. 
E) None of the above. 
A) $358,000. 
B) $343,000. 
C) $328,000. 
D) $313,000. 
E) None of the above.

Question 7

At the time of his death,Harvey was a shareholder in Grebe Corporation.In valuing the Grebe stock included in Harvey's gross estate,the IRS contends that the corporation possessed considerable goodwill.In disputing this contention,which of the following point(s)is/are relevant?

Accepted Answer

A) To provide financing,Grebe has been obtaining its working capital from banks at a market rate of interest. 
B) The rate of return used by the IRS for the type of business involved is too high. 
C) Harvey was not an employee of Grebe but was merely a passive investor. 
D) Average net profit figures include large gains from unrelated investments. 
E) None of the above. 
A) To provide financing,Grebe has been obtaining its working capital from banks at a market rate of interest. 
B) The rate of return used by the IRS for the type of business involved is too high. 
C) Harvey was not an employee of Grebe but was merely a passive investor. 
D) Average net profit figures include large gains from unrelated investments. 
E) None of the above.

Question 8

Wesley has created an irrevocable trust: life estate to Eve,remainder to Ernest upon Eve's death.In using the IRS valuation tables,what information is needed to determine the value of Eve's life estate?

Accepted Answer

Besides the amount placed in trust,it is

Question 9

What are some of the pitfalls in the use of § 2032A (special use valuation method)?

Accepted Answer

The following proble

Question 10

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 usual 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 11

Art makes a gift of stock in Drab 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 six trading days before (mean selling price of $120)and five days after (mean selling price of $100).Determine the fair market value of the Drab stock on the date of the gift.

Accepted Answer

$101.91,de

Question 12

Presuming the § 2032A election is properly made in 2012,what value is included in the gross estate in each of the following independent situations?

Accepted Answer

Situation A is $4,000,000,as r

Question 13

Application of the blockage rule has not been limited to just the valuation of stocks and bonds but has been applied to other assets.

Accepted Answer

A) True 
 B)False

Question 14

Lisa has been widowed three times.Her first husband died in 2009 leaving an unused exclusion amount of $3.5 million.The second husband died in early 2011 leaving the entire $5 million exclusion amount unused.Lisa's third husband died in late 2011 with an unused exclusion amount of $4 million.Lisa's DSUEA is:

Accepted Answer

A) $3.5 million. 
B) $4 million. 
C) $5 million. 
D) $9 million. 
E) $12.5 million. 
A) $3.5 million. 
B) $4 million. 
C) $5 million. 
D) $9 million. 
E) $12.5 million.

Question 15

In a typical estate freeze involving family limited partnerships established by parents for their children:

Accepted Answer

A) By gift,the parents transfer interests as general partners,retaining the limited partnership interests. 
B) By gift,the parents transfer limited partnership interests,retaining the general partner interests. 
C) The interests transferred to the children involve the control of the business. 
D) As to the interests passing to the children,large discounts are claimed due to the blockage factor. 
E) None of the above. 
A) By gift,the parents transfer interests as general partners,retaining the limited partnership interests. 
B) By gift,the parents transfer limited partnership interests,retaining the general partner interests. 
C) The interests transferred to the children involve the control of the business. 
D) As to the interests passing to the children,large discounts are claimed due to the blockage factor. 
E) None of the above.

Question 16

In arriving at the value of stock in a closely held business,the IRS frequently imputes goodwill.Comment on how the following independent factors would affect the determination of goodwill.

Accepted Answer

The answer of In arriving at the value of stock...

Question 17

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) Two 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) Two 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 18

Paula owns an insurance policy on her life payable to her estate.On Paula's death,the insurance proceeds are included in her gross estate but not her probate estate.

Accepted Answer

A) True 
 B)False

Question 19

Under Cindy's will,her share of their community property passes to Van,her surviving spouse.Cindy's property is not subject to probate.

Accepted Answer

A) True 
 B)False

Question 20

Becky inherited property from her mother seven years ago.The property was listed on her mother's estate tax return (Form 706)as having a value of $300,000.Becky is going to sell the property for $800,000,but she believes her real income tax basis is much more than $300,000.Which of the following factors,if any,helps Becky in challenging this basis?

Accepted Answer

A) She should file an amended Form 706 showing a higher value. 
B) She is not certain what the exact value of the property was seven years ago. 
C) She was the executor of her mother's estate. 
D) The value listed on Form 706 was the result of a negotiated compromise between the IRS and the estate. 
E) None of the above. 
A) She should file an amended Form 706 showing a higher value. 
B) She is not certain what the exact value of the property was seven years ago. 
C) She was the executor of her mother's estate. 
D) The value listed on Form 706 was the result of a negotiated compromise between the IRS and the estate. 
E) None of the above.

Cost and time are usually saved by passing ownership to out-of-state real estate by gift rather than by death.

Robert and Kristen are husband and wife.Ten years ago,they purchased stock for $500,000.Kristen dies first in 2012 when the property is worth $1,000,000.Assuming the property passes to Robert,what is his income tax basis under the following ownership assumptions?

Clancy and Maureen are husband and wife and have always lived in a community property state.When Clancy learns that he is terminally ill,he gives to Maureen all of his share of the community investments that have declined in value.Why?

Andrew makes a gift of securities (basis of $1,100,000;fair market value of $800,000)to his son,Carl.As a result of the transfer,Andrew paid a gift tax of $80,000.What is Carl's income tax basis in the securities if the gift occurred in 2012?

In 2010,Pam makes a gift of land (basis of $313,000;fair market value of $913,000)to her granddaughter,Tracy.As a result of the transfer,Pam paid a gift tax of $45,000.Tracy's income tax basis in the land is:

At the time of his death,Harvey was a shareholder in Grebe Corporation.In valuing the Grebe stock included in Harvey's gross estate,the IRS contends that the corporation possessed considerable goodwill.In disputing this contention,which of the following point(s)is/are relevant?

Wesley has created an irrevocable trust: life estate to Eve,remainder to Ernest upon Eve's death.In using the IRS valuation tables,what information is needed to determine the value of Eve's life estate?

What are some of the pitfalls in the use of § 2032A (special use valuation method)?

Presuming the § 2032A election is properly made in 2012,what value is included in the gross estate in each of the following independent situations?

Application of the blockage rule has not been limited to just the valuation of stocks and bonds but has been applied to other assets.

In a typical estate freeze involving family limited partnerships established by parents for their children:

In arriving at the value of stock in a closely held business,the IRS frequently imputes goodwill.Comment on how the following independent factors would affect the determination of goodwill.

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

Paula owns an insurance policy on her life payable to her estate.On Paula's death,the insurance proceeds are included in her gross estate but not her probate estate.

Under Cindy's will,her share of their community property passes to Van,her surviving spouse.Cindy's property is not subject to probate.

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

Filters

Exam 19: Family Tax Planning

Cost and time are usually saved by passing ownership to out-of-state real estate by gift rather than by death.

Robert and Kristen are husband and wife.Ten years ago,they purchased stock for $500,000.Kristen dies first in 2012 when the property is worth $1,000,000.Assuming the property passes to Robert,what is his income tax basis under the following ownership assumptions?

Clancy and Maureen are husband and wife and have always lived in a community property state.When Clancy learns that he is terminally ill,he gives to Maureen all of his share of the community investments that have declined in value.Why?

Andrew makes a gift of securities (basis of $1,100,000;fair market value of $800,000)to his son,Carl.As a result of the transfer,Andrew paid a gift tax of $80,000.What is Carl's income tax basis in the securities if the gift occurred in 2012?

In 2010,Pam makes a gift of land (basis of $313,000;fair market value of $913,000)to her granddaughter,Tracy.As a result of the transfer,Pam paid a gift tax of $45,000.Tracy's income tax basis in the land is:

At the time of his death,Harvey was a shareholder in Grebe Corporation.In valuing the Grebe stock included in Harvey's gross estate,the IRS contends that the corporation possessed considerable goodwill.In disputing this contention,which of the following point(s)is/are relevant?

Wesley has created an irrevocable trust: life estate to Eve,remainder to Ernest upon Eve's death.In using the IRS valuation tables,what information is needed to determine the value of Eve's life estate?

What are some of the pitfalls in the use of § 2032A (special use valuation method)?

Presuming the § 2032A election is properly made in 2012,what value is included in the gross estate in each of the following independent situations?

Application of the blockage rule has not been limited to just the valuation of stocks and bonds but has been applied to other assets.

In a typical estate freeze involving family limited partnerships established by parents for their children:

In arriving at the value of stock in a closely held business,the IRS frequently imputes goodwill.Comment on how the following independent factors would affect the determination of goodwill.

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

Paula owns an insurance policy on her life payable to her estate.On Paula's death,the insurance proceeds are included in her gross estate but not her probate estate.

Under Cindy's will,her share of their community property passes to Van,her surviving spouse.Cindy's property is not subject to probate.

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

Filters