American College HS330 Exam Questions Instant Access

Question 1

Which of the following statements concerning state death taxes is correct?

AA deduction for the full amount of state death taxes paid by a decedent estate is allowed on a decedent federal estate tax return.

BA state estate tax is imposed on the right of heirs to receive property from the deceased.

CA state inheritance tax is imposed on the right of the deceased to leave property to heirs.

DState estate and inheritance taxes are generally imposed at the same rate regardless of the relationship of the deceased to the beneficiary.

Answer : A

Question 2

When the owner of a closely held business dies, the payment of a portion of the federal estate tax may be deferred for a period of several years if the estate otherwise qualifies under the provisions of NRC Section 6166. Which of the following statements concerning this deferral of federal estate tax is correct?

AThe interest rate on the deferred tax is determined by the prime rate in effect on the date of death.

BThe interest on the unpaid estate tax is payable over the first 10 years after which the tax plus interest on the balance is payable in equal installments for the last 5 years.

CTo qualify for the tax deferral, the closely held business must represent more than 50 percent of the value of the decedent's adjusted gross estate.

DUnder certain circumstances, the estate will forfeit its right to tax deferral, and all the remaining unpaid estate tax will become due and payable immediately.

Answer : D

Question 3

The Decedent, T, died this year. The facts concerning T estate are:

Gross estate $2,700,000

Marital deduction 900,000

Charitable deduction 110,000

Gifts made after 1976 130,000

State death taxes payable 165,000

What is T taxable estate?

A$1,285,000

B$1,395,000

C$1,525,000

D$1,655,000

Answer : C

Question 4

A taxable gift has been made in which of the following situations?

1. A father manages his disabled son's business for a year without compensation since a replacement manager would have cost $25,000.

2. A father verbally promises his 21-year-old daughter that he will give her his antique Mercedes when she graduates from college next year.

Al only

BII only

CBoth l and ll

DNeither l nor ll

Answer : D

Question 5

Alan, a widower, is a retired executive with substantial assets. He wishes to provide for the financial security of his two grandchildren since their father, Alan's son, has always managed money poorly. This year Alan would like each grandchild to receive a substantial gift. Which of the following statements concerning the generation-skipping transfer tax (GSTT) on these gifts is (are) correct?

1I. Federal estate or gift tax will not be imposed if the gift is otherwise subject to the GSTT.

2. Assuming no prior gifts, Alan can gift a cumulative total of (not including the annual exclusion) $1.5 million to his grandchildren without the imposition of the GSTT.

Al only

BII only

CBoth l and ll

DNeither l nor ll

Answer : B

Question 6

Which of the following statements concerning ownership of property under a tenancy by the entirety is correct?

AOne tenant can freely transfer his or her property interest to a third person.

BIt is a form of property ownership available only to married persons.

CThe property will be in the probate estate of the first joint tenant to die.

DIt is a form of property ownership that applies only to personal property.

Answer : B

Question 7

Generally the courts will accept as the federal estate tax value of a closely held corporate business the price established by a buy-sell agreement if all the following conditions are met EXCEPT:

AThe agreement requires the payment of liquidated damages to the survivors if the executor fails to carry out its terms.

BThe agreement as to per-share value is fair, adequate, and made at arm's length.

CThe agreement requires a deceased share holder's executor to sell the stock at the price specified in the agreement.

DThe agreement requires a shareholder to first offer his stock to the corporation or other shareholders at the specified price if he wishes to sell it during his lifetime.

Answer : A

American College Fundamentals of Estate Planning test HS330 Exam Questions