Question 1

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

Question 2

Match each statement with the correct choice. Some choices may be used more than once or not used at all
-Discount for lack of marketability as to 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

Question 3

Curt owns the following assets which he gives to his daughter Carla. No gift tax results.  Both items have been held by Curt as an investment for more than one year. If Carla immediately sells these assets for $1 million ($400,000 + $600,000), she recognizes:

Accepted Answer

A)  No gain or loss. 
B)  A $200,000 LTCG and no loss. 
C)  A $200,000 STCG and $200,000 STCL. 
D)  A $200,000 STCG and no loss. 
E)  A $200,000 LTCG and $200,000 LTCL.

Question 4

Match each statement with the correct choice. Some choices may be used more than once or not used at all
-Measure of income tax deduction on a gift of depreciated property to charity.

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

Question 5

The election of special use valuation estate tax savings has income tax implications.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following procedures carried out will reduce both Mary's future gross estate and her probate estate?

Accepted Answer

A)  Mary issues a timely disclaimer as to real estate that is willed to her by her grandfather. 
B)  Mary creates a revocable trust naming her children as the beneficiaries. 
C)  One year before her death, Mary gives an insurance policy on her life to her son, the designated beneficiary. 
D)  Mary purchases real estate as joint tenants with her sister. Mary predeceases her sister. 
E)  None of the above.

Question 7

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 8

In satisfying the more-than-35% test of § 6166 (i.e., extended estate tax payment schedule relative to an interest in a closely held business), prior gifts the decedent has made may have to be considered.

Accepted Answer

A) True 
 B)False

Question 9

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

Question 10

Richard and Marie are joint tenants in a tract of land. Upon Richard's prior death, Marie's income tax basis in the land does not change.

Accepted Answer

A) True 
 B)False

Question 11

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 12

How could the election of the alternate valuation date (§ 2032) increase a decedent's marital deduction?

Accepted Answer

The answer of How could the election of the alternate...

Question 13

At the time of her death in 2015, 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 rate of return and goodwill exists, what is a possible value for the stock to be included in Carol's gross estate?

Accepted Answer

The answer of At the time of her death in...

Question 14

In 2005, Gloria purchased as an investment unimproved land for $50,000. In 2015, Gloria sells the land, now worth $200,000, to her church for $50,000. As a result of this transaction, Gloria reports:

Accepted Answer

A)  No gain and no charitable deduction. 
B)  No gain and a charitable deduction of $50,000. 
C)  No gain and a charitable deduction of $150,000. 
D)  A $150,000 capital gain and a charitable deduction of $200,000. 
E)  A $37,500 capital gain and a charitable deduction of $150,000.

Question 15

Which, if any, of the following statements properly characterize features involving buy-sell agreements?

Accepted Answer

A)  If properly structured, the agreements can control valuation for estate tax purposes. 
B)  If a stock redemption is proposed, utilize a cross-purchase type. 
C)  Agreements cannot be used to control disposition of partnership interests. 
D)  Arrangements work best when the interest to be transferred involves publicly traded securities. 
E)  None of the above.

Question 16

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

The answer of Clancy and Maureen are husband and wife...

Question 17

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 18

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 19

In 2015, Donna's father dies and leaves her the family farm. The farm has a current use value of $4,000,000 and a best use value of $4,500,000. If the § 2032A election is made, the farm should be included in the father's gross estate at a value of:

Accepted Answer

A)  $1,100,000. 
B)  $2,900,000 ($4,000,000 - $1,100,000). 
C)  $3,400,000 ($4,500,000 - $1,100,000). 
D)  $4,000,000. 
E)  None of the above.

Question 20

In April 2014, Tim makes a gift of real estate (basis of $900,000; fair market value of $800,000) to his aunt. After the gift, the aunt makes $50,000 worth of capital improvements to the property. The aunt dies in March 2015, when the property is worth $840,000. Under the aunt's will, the realty passes to Tim. Tim's income tax basis in the property is:

Accepted Answer

A)  $840,000. 
B)  $890,000. 
C)  $900,000. 
D)  $950,000. 
E)  None of the above.

Exam 19: Family Tax Planning

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.

Match each statement with the correct choice. Some choices may be used more than once or not used at all -Discount for lack of marketability as to stock.

Curt owns the following assets which he gives to his daughter Carla. No gift tax results. Both items have been held by Curt as an investment for more than one year. If Carla immediately sells these assets for $1 million ($400,000 + $600,000) , she recognizes:

Match each statement with the correct choice. Some choices may be used more than once or not used at all -Measure of income tax deduction on a gift of depreciated property to charity.

The election of special use valuation estate tax savings has income tax implications.

Which of the following procedures carried out will reduce both Mary's future gross estate and her probate 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.

In satisfying the more-than-35% test of § 6166 (i.e., extended estate tax payment schedule relative to an interest in a closely held business), prior gifts the decedent has made may have to be considered.

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

Richard and Marie are joint tenants in a tract of land. Upon Richard's prior death, Marie's income tax basis in the land does not change.

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.

How could the election of the alternate valuation date (§ 2032) increase a decedent's marital deduction?

In 2005, Gloria purchased as an investment unimproved land for $50,000. In 2015, Gloria sells the land, now worth $200,000, to her church for $50,000. As a result of this transaction, Gloria reports:

Which, if any, of the following statements properly characterize features involving buy-sell agreements?

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?

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

In 2015, Donna's father dies and leaves her the family farm. The farm has a current use value of $4,000,000 and a best use value of $4,500,000. If the § 2032A election is made, the farm should be included in the father's gross estate at a value of: