Quiz On Account Statement: Trivia Exam!

The alternate valuation date is generally set at 6 months after the date of death. This date is used for determining the fair market value of the assets included in the decedent's estate for estate tax purposes. It allows for potential fluctuations in the value of the assets during this time period, which can be beneficial for the estate if the value of the assets has decreased. By using the alternate valuation date, the estate may be able to reduce the estate tax liability.

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The appraisal methods used to value real estate for estate tax purposes may include comparable sales, reproduction cost, and capitalization of earnings. Comparable sales method involves comparing the property with similar properties that have recently been sold in the same area. Reproduction cost method estimates the cost of reproducing the property at current prices. Capitalization of earnings method determines the value based on the income the property can generate. Therefore, all of these methods can be used to value real estate for estate tax purposes.

All of the above options are deductible in arriving at the amount of the taxable estate. Expenses incurred in administering the estate, casualty losses that occurred while administering the estate, and charitable contributions can all be deducted from the taxable estate. This means that these expenses and losses can be subtracted from the total value of the estate, reducing the amount of taxable income. By deducting these expenses and losses, the taxable estate is lowered, resulting in potentially lower estate taxes.

Polly's estate includes the portion of the condominium that she contributed towards, which is 60% of the cost. Since the cost of the condominium was $200,000, 60% of $200,000 is $120,000. However, the value of the condominium at the time of Polly's death is $300,000. Therefore, the amount included in Polly's estate would be the higher of the two values, which is $180,000.

The correct answer is $3,500,000. In 2009, the federal estate tax liability could be eliminated by the unified credit up to a maximum taxable estate of $3,500,000. This means that if the taxable estate is equal to or below this amount, the unified credit would completely offset the estate tax liability, resulting in no tax owed.

The gifted property would be included in the donor's gross estate if the donor retains a life estate in the gift property (I) or retains the power to revoke or amend the gift (II). This means that the donor still has control or ownership over the property even though it has been gifted. These circumstances indicate that the donor has not fully transferred the property and therefore it would still be considered part of their estate for tax purposes.

A reversionary interest means that there is a possibility for the property to be transferred back to the original owner based on the terms of the transfer. This means that the transferor retains some control or claim over the property even after it has been transferred.

If spouses are the only joint owners, only one-half of the value of the jointly owned property is included in the gross estate, regardless of the relative amount of consideration provided by either spouse. This means that even if one spouse contributed more towards the property, only half of its value will be considered in the gross estate for estate tax purposes.

The purpose of the GSTT (generation-skipping transfer tax) is to impose a transfer tax one time per generation. This means that when assets are transferred from one generation to another, a tax will be imposed on the transfer. The tax is designed to prevent wealthy individuals from avoiding estate taxes by transferring assets directly to their grandchildren or other beneficiaries, skipping a generation. By imposing a transfer tax, the GSTT ensures that wealth is not accumulated and passed down through multiple generations without being taxed.

The major problem facing executors in managing the estate is liquidity. This means that they struggle with having enough cash or liquid assets to pay off the debts and expenses of the estate. Executors often need to sell assets or find other sources of funds to meet these obligations. Identifying deductions, the unified credit computation, and determining the method to value assets are also important aspects of managing an estate, but liquidity is the most pressing concern.

An annuity that ceases payments with the death of the decedent and does not provide any further benefits to any other party is not included in the gross estate. This means that the statement "If an annuity ceases payments with the death of the decedent and nothing is to be received by any other party, the annuity is included in the gross estate" is false.

The alternate valuation date can be elected for estate tax purposes only if both the value of the gross estate decreases and the estate tax liability decreases. This means that both options B and C are required in order to make the election. If only one of these requirements is met, the alternate valuation date cannot be elected.

The amount included in Alejandro's gross estate is $81,000. This is because the value of the annuity at the time of Alejandro's death is used to determine the inclusion in the gross estate. Since a comparable contract would have cost $81,000 at the time of Alejandro's death, this is the amount that is included in his gross estate.

The correct answer is that an executor may elect to postpone payment of the estate tax attributable to a remainder or reversionary interest until six months after the interests of the other person(s) terminate. This means that the executor has the option to delay the payment of estate tax for a specific type of interest until a certain period after the interests of other individuals end. This allows for flexibility in managing the payment of estate taxes and can help in certain situations where it may be more beneficial to postpone the payment.

The unified credit is the only credit common to both the gift and estate tax computation. This means that when calculating both gift tax and estate tax, the unified credit can be applied. The other statements are false because publicly traded stocks for estate tax purposes are valued at their fair market value on the date of death, not the closing price, and stocks traded on a stock exchange are valued at their fair market value on the date of death, not the closing price unless the alternate valuation date is elected.

The correct answer is "Regardless of how large the gross estate is, the estate tax liability can be completely eliminated if the estate is willed to a charitable organization." This statement is true because when an estate is willed to a charitable organization, it qualifies for a charitable deduction, which can offset the estate tax liability. This means that regardless of the size of the estate, if it is left to a charitable organization, the estate tax liability can be completely eliminated.

The false statement is that property is not eligible for the marital deduction if it passes to the spouse under the individual's dower rights. In reality, property passing to the spouse under dower rights is eligible for the marital deduction. The marital deduction allows the value of property passing to a surviving spouse to be deducted from the decedent's gross estate for estate tax purposes. Dower rights refer to a widow's right to a portion of her deceased husband's estate. Therefore, property passing to the spouse under dower rights would still qualify for the marital deduction.

The value of a stock that is not publicly traded can be determined by considering the nature and history of the business, as this provides insight into its potential growth and stability. Additionally, the earning capacity of the business is important to assess its profitability and future prospects. Lastly, the dividend paying capacity of the business indicates its ability to generate returns for shareholders. Considering all of these factors together allows for a comprehensive evaluation of the value of a stock that is not publicly traded.

The correct answer is that the period for payment of estate taxes may be extended if the executor shows "reasonable cause" for not being able to pay some, or all, of the estate tax liability on the regular due date. This means that if the executor can provide a valid reason for not being able to pay the estate tax on time, they may be granted an extension to make the payment.

The correct answer is "All are allowable." This means that all of the mentioned items - the estate's death taxes, funeral expenses, and administrative expenses - are allowed to be included in the calculation of the maximum amount of stock redemption proceeds under Sec. 303.

The correct answer is that in general, an estate tax return is not required to be filed unless the value of the gross estate and adjusted taxable gifts exceeds the exemption equivalent. This means that if the value of the estate and gifts falls below the exemption threshold, there is no need to file an estate tax return.

For gift or estate tax purposes, the FMV (Fair Market Value) of an asset is generally the same, except for life insurance policies. Life insurance policies have a unique valuation method called the interpolated terminal reserve method, which takes into account the policy's cash surrender value, death benefit, and other factors. This method is used to determine the FMV of life insurance policies for tax purposes. Therefore, the FMV of life insurance policies differs from other assets when it comes to gift or estate tax calculations.

Special use valuation is a provision in the United States tax code that allows certain farmland to be valued at its current use rather than its highest and best use, which can help reduce estate taxes. This provision is specifically designed to address liquidity problems that may arise when passing down farmland from one generation to the next. Therefore, the statement "Special use valuation is available for farmland to help alleviate liquidity problems" is true.

The correct answer is $3,600,000. When the executor elects to claim the marital deduction for the QTIP transfer, the value of the QTIP trust is included in the surviving spouse's gross estate. In this case, the value of the QTIP trust at the time of the surviving spouse's death is $3.6 million, so that is the amount included in the gross estate.

Betty's gross estate is calculated by adding up the fair market value of all her assets at the time of her death. In this case, her stock is valued at $200,000, her home is valued at $1,500,000, she has $70,000 in cash, and there is a life insurance policy with a face value of $500,000. Adding all these values together gives a gross estate of $1,770,000.

A qualified disclaimer is a valuable estate planning tool because it allows the person making the disclaimer to avoid being treated as the gift-maker. By disclaiming the assets, the person is not considered to have made a gift, which can have important tax implications. This can be beneficial in terms of estate tax planning and preserving the value of the assets for the intended recipient.

If the alternative valuation date is elected, changes in value that occur solely because of "mere lapse of time" must be ignored. This means that any increase or decrease in the value of the estate that is solely due to the passage of time, such as changes in market value, interest, or inflation, will not be taken into account for estate tax purposes. This allows for a fairer valuation of the estate, as it eliminates any fluctuations in value that are unrelated to the actual assets and liabilities of the estate.

Bart must live for a minimum of three years to avoid the inclusion of the $700,000 death benefit in his estate. This is because of the three-year rule for life insurance policies. According to this rule, if an individual transfers ownership of a life insurance policy and dies within three years of the transfer, the death benefit will still be included in their estate for estate tax purposes. Therefore, to ensure that the death benefit is not subject to estate tax, Bart must survive for at least three years after transferring ownership of the policy.

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The annuity valued at $600,000 will be included in Gary's gross estate because it is a benefit from the retirement plan maintained by Yoyo Corporation, to which Gary made contributions. Since Gary is employed at the time of his death, the annuity will be considered part of his estate for tax purposes.

Denise's gross estate should only include the interest and dividends that she received prior to the date of her death. This is because the gross estate includes all of the decedent's property and assets at the time of their death. Since Denise passed away on April 1, any interest and dividends received after that date would not be part of her estate.

The "blockage" regulations do not allow the IRS to prevent the estate's executor from electing the alternate valuation date.

The correct answer is that gift taxes on gifts made by the decedent or the decedent's spouse that are paid by the decedent or his estate during the three-year period ending with the decedent's date of death must be included in the decedent's gross estate. This means that any gift taxes that were paid by the decedent or their estate within three years prior to the decedent's death will be added to the value of the decedent's estate for tax purposes. This ensures that any taxes paid on gifts made shortly before death are accounted for and included in the overall estate value.

The correct answer is that the credit for state death taxes has been replaced with a deduction for state estate taxes. This means that instead of receiving a credit for the amount of state death taxes paid, the estate can now deduct the amount of state estate taxes paid from the taxable estate. This change in the tax law affects how the estate tax liability is calculated for individuals.

When Joe's estate is subject to an estate tax of $2 million, Claudia's estate receives a credit for the full amount of Joe's estate tax, which is $2 million. This means that Claudia's estate can subtract this amount from its own estate tax liability, reducing the overall tax burden. Therefore, the correct statement is that Claudia's estate receives a credit for $2,000,000 of Joe's estate tax.

The payment date for estate taxes may be extended by the IRS for various reasons. One valid reason is if the estate includes a 40% interest in a closely held business. Another valid reason is if the estate includes a relatively large remainder or reversionary interest. Additionally, if the executor of the estate shows reasonable cause, the payment date may also be extended. Therefore, all of the given reasons are valid for the IRS to extend the payment date for estate taxes.

A stock redemption to pay death taxes under Sec. 303 is generally treated as a sale or exchange of property. This means that when a stock is redeemed to pay death taxes, it is considered as a transaction where the stockholder is selling or exchanging their ownership in the stock. This treatment has tax implications, such as potential capital gains or losses, that would not be applicable if it were treated as a dividend or a return of capital.

The entire value of the trust, which is $1,200,000, is included in Paul's estate because he had the power to determine the amount of distributions each year as the trustee. This means that he had control over the trust and its assets, making it part of his estate upon his death. Therefore, the correct answer is $1,200,000.

Sasha has used all of her unified credit, which means she has exhausted the amount of money she can give without being subject to gift taxes. Therefore, the full amount of $1,000,000 will be subject to gift tax. Since Sasha is in the 45% marginal gift tax bracket, the tax on this transfer will be 45% of $1,000,000, which equals $450,000. However, in addition to the gift tax, Sasha will also owe the amount of tax that would have been due on the unified credit she used, which is $1,102,500. Therefore, the total tax on this transfer is $1,102,500.

A curtesy interest refers to the legal right that a widower has in his deceased wife's property. This means that the widower has a claim or entitlement to a portion of his wife's property after her death. It is important to note that curtesy rights are specific to widowers and do not apply to widows.

When Nils transferred the life insurance policy to his daughter, Gail, she paid him $50,000. This payment is considered as consideration for the transfer. However, since the $50,000 cash is still in a savings account when Nils dies, it is not included in his gross estate. Therefore, the consideration offset when computing Nils's gross estate is $0, as the $50,000 is not counted as part of his assets at the time of his death.

All of the statements provided are false. Administrative expenses can be deducted on the estate's income tax return. Casualty or theft losses incurred during the administration of the estate can be deducted on the estate tax return. There is no specific limitation of $100,000 on the charitable contribution deduction for estate tax purposes.

If a transferor retains voting rights in stock of a controlled corporation for the transferor's lifetime, the stock is included in the transferor's gross estate. This means that if someone transfers stock to a controlled corporation but retains the right to vote on that stock for their lifetime, the value of that stock will be included in their gross estate for tax purposes. This is because the transferor still has control over the stock and can potentially benefit from it even after transferring it.

When Mike exchanged the land with David and made a cash contribution, it can be considered as a gift from David to Mike. Since the new land is titled with David and Mike as joint tenants with the right of survivorship, when Mike dies, David automatically becomes the sole owner of the land. Therefore, Mike's estate will not include any value from the land, resulting in $0.

The correct answer is "transferee is liable for the generation skipping transfer tax (GSTT) in the case of a direct skip." This statement is false because in the case of a direct skip, the transferor is responsible for paying the generation skipping transfer tax (GSTT), not the transferee. The GSTT is imposed to ensure that there is a tax on transfers that skip a generation, but the liability for paying the tax falls on the transferor, not the recipient.

The amount included in Roper's gross estate due to the life insurance policy is $0 because Roper transferred ownership of the policy to his son four years ago. When ownership of a life insurance policy is transferred, the policy is no longer considered part of the insured person's estate for tax purposes. Therefore, the cash value or death benefit of the policy is not included in Roper's gross estate upon his death.

Martha had received the stock valued at $110,000 in 1999 from Roger. In 2000, she used this stock as partial consideration, along with $110,000 provided by her brother Pat, to acquire realty worth $220,000. As the realty was titled in the names of Martha and Pat as joint tenants with right of survivorship, Martha's ownership interest in the realty was only $110,000 (her contribution). Therefore, only this amount will be included in Martha's estate upon her death. Since the realty is valued at $300,000 at Martha's death, the correct answer is $150,000, which is half of the total value.

All of the options listed in the question are credits for the federal estate tax. This means that each of these credits can be used to reduce the overall estate tax liability. The credit for gift tax paid on pre-1977 gifts allows for the amount of gift tax paid on gifts made before 1977 to be deducted from the estate tax liability. The credit for estate taxes paid on certain prior transfers allows for the amount of estate tax paid on certain transfers made before the current estate to be deducted from the estate tax liability. Lastly, the credit for foreign death taxes allows for the amount of foreign death taxes paid on property located outside the United States to be deducted from the estate tax liability.

The correct answer is $3,500,000. The unified credit is a tax credit that can be used to offset estate and gift taxes. In 2009, the unified credit was equivalent to a statutory exemption of $3,500,000. This means that an individual could pass on up to $3,500,000 worth of assets without incurring any estate or gift taxes.