Quiz On Account Statement: Trivia Exam!

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  • 1/64 Questions

    The alternate valuation date is generally:

    • 3 months after the date of death
    • 6 months after the date of death
    • 9 months after the date of death
    • 12 months after the date of death
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About This Quiz


Have you ever seen an account statement? An account statement is a recurring report summarizing account activity over a set period, and these statements can be considered a summary of the account and include accounts or services provided. Account statements need to be examined for accuracy, as historical statements are essential for budgeting. Take this exceptional quiz and see if your numbers add up.

Quiz On Account Statement: Trivia Exam! - Quiz

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  • 2. 

    Appraisal methods used to value real estate for estate tax purposes may include:

    • Comparable sales

    • Reproduction cost

    • Capitalization of earnings

    • All of the above

    Correct Answer
    A. All of the above
    Explanation
    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.

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  • 3. 

    Lou dies on April 12, 2007. All of Lou's property passed to Paula, his daughter. Paula dies January 15, 2009. Both Lou's and Paula's estates pay federal estate taxes. Lou's estate tax was $350,000. How much can Paula's estate claim for a credit for tax on prior transfers?

    • $350,000

    • $280,000

    • $210,000

    • $140,000

    Correct Answer
    A. $350,000
  • 4. 

    Which of the following is deductible in arriving at the amount of the taxable estate.

    • Expenses incurred in administering the estate

    • Casualty losses that occurred while administering the estate

    • Charitable contributions

    • All of the above

    Correct Answer
    A. All of the above
    Explanation
    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.

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  • 5. 

    In 2001, Polly and Fred, brother and sister, purchased a condominium at a golf resort. Polly contributed 60% of the $200,000 cost; Fred contributed 40%. Polly dies in the current year when the condominium has a $300,000 value. How much is included in Polly's estate?

    • $120,000

    • $180,000

    • $200,000

    • $300,000

    Correct Answer
    A. $180,000
    Explanation
    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.

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  • 6. 

    When computing the federal estate tax liability in 2009, the maximum amount for a taxable estate (not tentative tax) which the unified credit for the current year will eliminate all of the tax is

    • $555,800

    • $780,800

    • $3,500,000

    • $2,000,000

    Correct Answer
    A. $3,500,000
    Explanation
    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.

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  • 7. 

    Which of the following circumstances would cause the gifted property to be included in the donor's gross estate? I.    Donor retains a life estate in the gift property. II.  Donor retains the power to revoke or amend the gift. III. Donor gives more than $13,000 to one donee in one year. IV.       Donor dies within three years of gifting land

    • I, II and III

    • I, II

    • II, IV

    • III, IV

    Correct Answer
    A. I, II
    Explanation
    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.

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  • 8. 

    Identify which of the following statements is true

    • 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

    • Special powers of appointment give the power holder less restricted powers than a general power of appointment

    • The gross estate does not include the value of life insurance policies on the decedent if the proceeds are receivable by the executor or for the benefit of the estate

    • All are false

    Correct Answer
    A. 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
    Explanation
    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.

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  • 9. 

    Identify which of the following statements is true

    • Reversionary interests of less than 5% are includible in the gross estate

    • A reversionary interest means a chance exists that the property may pass back to the transferor under the terms of the transfer

    • If a reversionary interest exceeds 3% of the property's value, the amount that is included in the estate is not the value of the reversionary interest, but rather the date-of-death value of the gifted property less the value of intervening life estates

    • All are false

    Correct Answer
    A. A reversionary interest means a chance exists that the property may pass back to the transferor under the terms of the transfer
    Explanation
    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.

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  • 10. 

    The GSTT's (generation-skipping transfer tax) purpose is

    • To impose a graduated transfer tax one time a generation.

    • To impose some form of transfer tax one time a generation.

    • To impose a graduated transfer tax every other generation.

    • To impose some form of transfer tax every other generation

    Correct Answer
    A. To impose some form of transfer tax one time a generation.
    Explanation
    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.

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  • 11. 

    One of the major problems facing executors in managing the estate is

    • Identifying deductions.

    • Liquidity.

    • The unified credit computation.

    • Determining the method to value assets

    Correct Answer
    A. Liquidity.
    Explanation
    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.

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  • 12. 

    Identify which of the following statements is false

    • Annuities not related to employment are valued in the gross estate at the cost of a comparable contract multiplied by a fraction that represents the portion of the purchase price that the decedent has contributed (A)

    • 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.

    • When persons other than spouses own property jointly, the amount included in the joint owner's gross estate is measured in accordance with the consideration the decedent furnished to purchase the property (C)

    • Statements A and C are true

    Correct Answer
    A. 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.
    Explanation
    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.

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  • 13. 

    The alternate valuation date can be elected for estate tax purposes only if the election.

    • Increases the value of the gross estate

    • Decreases the value of the gross estate (B)

    • Decreases the estate tax liability (after reduction for tax credits). (C)

    • Both B and C are required

    Correct Answer
    A. Both B and C are required
    Explanation
    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.

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  • 14. 

    Identify which of the following statements is true.

    • The unified credit is the only credit common to both the gift and estate tax computation.

    • For estate tax purposes, publicly traded stocks are valued at their closing price on the date of death

    • Stocks traded on a stock exchange are valued at closing price for the date of death unless the alternate valuation date is elected

    • All are false

    Correct Answer
    A. The unified credit is the only credit common to both the gift and estate tax computation.
    Explanation
    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.

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  • 15. 

    In 2001, Alejandro buys an annuity for $100,000 that will pay Alejandro an annual amount for life with survivor benefits to his wife. When Alejandro dies in the current year a comparable contract would have cost $81,000. What amount is included in Alejandro's gross estate?

    • $0

    • $81,000

    • $100,000

    • $181,000

    Correct Answer
    A. $81,000
    Explanation
    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.

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  • 16. 

    Identify which of the following statements is true.

    • The estate tax on interests in certain closely held businesses may be paid in installments over a 15-year period if elected

    • 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

    • A corporation with 25 owners can be classified as a closely held business if the decedent's gross estate holds 10% of the stock

    • All are false.

    Correct Answer
    A. 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
    Explanation
    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.

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  • 17. 

    The value of the stock that is not publicly traded may be determined by considering:

    • The nature and history of the business

    • Earning capacity.

    • Dividend paying capacity.

    • All of the above

    Correct Answer
    A. All of the above
    Explanation
    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.

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  • 18. 

    Identify which of the following statements is true

    • 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

    • There is a ceiling on the marital deduction

    • All transfers to the surviving spouse are eligible for the marital deduction

    • All are false

    Correct Answer
    A. 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
    Explanation
    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.

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  • 19. 

    Identify which of the following statements is false

    • To qualify for the marital deduction, property must be includible in the decedent's gross estate

    • Is not eligible for the marital deduction if it passes to the spouse under the individual's dower rights

    • A terminable interest is one that ceases upon the passage of time or the occurrence of some event

    • Some, but not all, terminal interests qualify for the marital deduction

    Correct Answer
    A. Is not eligible for the marital deduction if it passes to the spouse under the individual's dower rights
    Explanation
    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.

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  • 20. 

    The FMV of an asset for gift or estate tax purposes is the same except for

    • Marketable securities

    • Land.

    • Life insurance policies

    • Patents.

    Correct Answer
    A. Life insurance policies
    Explanation
    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.

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  • 21. 

    Identify which of the following statements is true.

    • 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

    • The estate tax on interests in certain closely held businesses may be paid in installments over a 15-year period if elected

    • An executor may elect to postpone payment of the estate tax attributable to a remainder or reversionary interest until eight months after the interests of the other person(s) terminate

    • All are false

    Correct Answer
    A. 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
    Explanation
    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.

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  • 22. 

    The maximum amount of the stock redemption proceeds under Sec. 303 is determined by summing all of the following except

    • The estate's death taxes

    • The estate's funeral expenses.

    • The estate's administrative expenses.

    • All are allowable.

    Correct Answer
    A. All are allowable.
    Explanation
    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.

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  • 23. 

    Identify which of the following statements is true.

    • 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.

    • Estate taxes must be paid when the return is filed including any extensions.

    • The estate tax return is due, ignoring extensions, 12 months after the decedent's date of death.

    • All are false

    Correct Answer
    A. 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.
    Explanation
    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.

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  • 24. 

    Identify which of the following statements is true.

    • The transferee is liable for the generation skipping transfer tax (GSTT) in the case of a direct skip

    • Special use valuation is available for farmland to help alleviate liquidity problems

    • Qualified disclaimers are not available for estate planning purposes

    • All are false

    Correct Answer
    A. Special use valuation is available for farmland to help alleviate liquidity problems
    Explanation
    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.

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  • 25. 

    Ernie died this year. His will creates a $2,000,000 QTIP trust for his widow. Ernie's executor elects to claim the marital deduction for the QTIP transfer. At the time of the surviving spouse's death, the value of the QTIP trust is $3.6 million. The amount of the QTIP trust included in the surviving spouse's gross estate is

    • $3,600,000

    • $2,000,000

    • $1,800,000

    • $0

    Correct Answer
    A. $3,600,000
    Explanation
    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.

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  • 26. 

    Betty dies on February 20 of the current year. Her estate consisted of the following assets, all valued as of her date of death:               Stock with a basis of $40,000 and a fair market value of $200,000             Home valued at $1,500,000 and a basis of $490,000             Cash of $70,000             Life insurance on Betty's life owned by her daughter with a $500,000 face value   What is Betty's gross estate?

    • $600,000

    • $1,100,000

    • $1,770,000

    • $2,270,000

    Correct Answer
    A. $1,770,000
    Explanation
    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.

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  • 27. 

    A qualified disclaimer is a valuable estate planning tool because:

    • It establishes the value of the disclaimed assets.

    • It qualifies the assets for the alternative valuation date.

    • It is not treated as a gift made by the person who disclaims..

    • It allows the person making the disclaimer to determine the recipient.

    Correct Answer
    A. It is not treated as a gift made by the person who disclaims..
    Explanation
    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.

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  • 28. 

    On March 1, Bart transfers ownership of a $700,000 life insurance policy on his life that he purchased in 2002. How long must Bart live to avoid inclusion of the $700,000 death benefit in his estate?

    • Six months

    • One year

    • Three years

    • No minimum time period exists

    Correct Answer
    A. Three years
    Explanation
    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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  • 29. 

    Identify which of the following statements is true.

    • The tax base for the federal estate tax is the total of the decedent's taxable estate and post-1976 taxable gifts

    • Property included in a decedent's gross estate consists of only that property to which the decedent held title

    • Funeral expenses are not deductible from the gross estate

    • All are false

    Correct Answer
    A. The tax base for the federal estate tax is the total of the decedent's taxable estate and post-1976 taxable gifts
    Explanation
    Page Ref.: C:13-2

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  • 30. 

    Identify which of the following statements is true.

    • The alternate valuation date can be used for estate tax purposes only if the election increases the value of the gross estate

    • If the alternative valuation date is elected, changes in value that occur solely because of "mere lapse of time" must be ignored

    • Gross estate, a federal law concept, is generally smaller than the probate estate, a state law concept

    • All are false

    Correct Answer
    A. If the alternative valuation date is elected, changes in value that occur solely because of "mere lapse of time" must be ignored
    Explanation
    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.

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  • 31. 

    Yoyo Corporation maintains a retirement plan for its employees to which it makes 70% of the contributions and the employees make 30%. Gary dies this year and is employed at the time of his death. Gary's spouse will receive an annuity valued at $600,000 from the retirement plan. How much of the annuity will be included in Gary's gross estate?

    • $180,000

    • $0

    • $600,000

    • $420,000

    Correct Answer
    A. $600,000
    Explanation
    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.

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  • 32. 

    The gross-up rule requires

    • All beneficial interests be included in the decedent's estate

    • Post-1976 gifts by the decedent be included in the decedent's estate

    • Certain gifts made by the decedent within three years of the date of death are included in the decedent's gross estate.

    • 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.

    Correct Answer
    A. 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.
    Explanation
    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.

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  • 33. 

    Denise died April 1 and owned several bonds that paid interest March 31 and September 30. Also, she owned stock that paid dividends quarterly on March 31, June 30, September 30, and December 31. Denise's estate received the interest and dividends on the payment dates. What should be included in Denise's gross estate?

    • All interest and dividends received in year of death

    • Only interest and dividends received prior to the date of death

    • Only interest and dividends received after the date of death

    • None of the interest and dividends received

    Correct Answer
    A. Only interest and dividends received prior to the date of death
    Explanation
    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.

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  • 34. 

    Identify which of the following statements is false

    • The "blockage" regulations allow the IRS to prevent the estate's executor from electing the alternate valuation date

    • If the alternate valuation date is elected, changes in value that occur solely because of a "mere lapse of time" usually are to be ignored

    • The alternate valuation date can be elected for estate tax purposes only if the election decreases the value of the gross estate and estate tax liability (after reduction for credits).

    • If property is sold within 6 months of the date of death, the alternative valuation date is the date of sale.

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

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  • 35. 

    Identify which of the following statements is true

    • If a marital deduction is elected on a QTIP trust transfer, property remaining in the QTIP trust is not included in the estate of the surviving spouse.

    • The credit for state death taxes has been replaced with a deduction for state estate taxes

    • The unified credit is the only credit allowed against the estate tax

    • All are false

    Correct Answer
    A. The credit for state death taxes has been replaced with a deduction for state estate taxes
    Explanation
    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.

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  • 36. 

    Joe dies late in 2007 and his estate is subject to an estate tax of $2 million. He leaves all of his assets to his daughter, Claudia. Claudia dies early in 2009. Which of the following statements is correct?

    • Claudia's estate receives no credit or deduction for the tax paid by Joe's estate

    • Claudia's estate receives a credit for $1,000,000 of Joe's estate tax.

    • Claudia's estate receives a credit for $2,000,000 of Joe's estate tax

    • Claudia's estate receives a deduction for $2,000,000 of Joe's estate tax

    Correct Answer
    A. Claudia's estate receives a credit for $2,000,000 of Joe's estate tax
    Explanation
    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.

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  • 37. 

    The payment date for estate taxes may be extended by the IRS for all of the following reasons except

    • The estate includes a 40% interest in a closely held business.

    • The estate includes a relatively large remainder or reversionary interest.

    • The executor of the estate shows reasonable cause.

    • All are valid reasons

    Correct Answer
    A. All are valid reasons
    Explanation
    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.

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  • 38. 

    A stock redemption to pay death taxes under Sec. 303 is generally treated as

    • A sale or exchange of property

    • A dividend.

    • A return of capital.

    • Ordinary income

    Correct Answer
    A. A sale or exchange of property
    Explanation
    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.

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  • 39. 

    In 2003 Paul transfers $1,000,000 to a trust benefiting his three children. As trustee, he has the power to determine the amount of distributions each year. Paul dies in the current year when the trust has a value of $1,200,000. How much of the trust's value is included in Paul's estate?

    • $0

    • $400,000

    • $1,000,000

    • $1,200,000

    Correct Answer
    A. $1,200,000
    Explanation
    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.

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  • 40. 

    Sasha gives $1,000,000 to her granddaughter. Sasha has used all of her unified credit and is in the 45% marginal gift tax bracket; ignore the annual exclusion and exemption. What is the amount of her tax on this transfer?

    • $450,000

    • $1,102,500

    • $1,450,000

    • $652,500

    Correct Answer
    A. $1,102,500
    Explanation
    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.

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  • 41. 

    Identify which of the following statements is true.

    • A curtesy interest is a widower's interest in his deceased wife's property

    • All gifts made within three years of the date of death must be included in the gross estate

    • Dower rights are not the same as curtesy rights

    • All are false

    Correct Answer
    A. A curtesy interest is a widower's interest in his deceased wife's property
    Explanation
    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.

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  • 42. 

    Two years ago Nils transfers a $200,000 life insurance policy on his life to his daughter, Gail. The policy is worth $60,000 at the time of transfer and Gail pays Nils $50,000. When Nils dies this year, the $50,000 cash is still in a savings account. The consideration offset when computing Nil's gross estate is

    • $0

    • $50,000

    • $150,000

    • $166,667

    Correct Answer
    A. $50,000
    Explanation
    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.

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  • 43. 

    Identify which of the following statements is true

    • Administrative expenses are not deductible on the estate's income tax return.

    • Casualty or theft losses incurred during the administration of the estate are not deductible on the estate tax return.

    • There is a limitation of $100,000 on the charitable contribution deduction for estate tax purposes

    • All are false

    Correct Answer
    A. All are false
    Explanation
    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.

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  • 44. 

    Identify which of the following statements is true

    • The gross-up rule applies to the gift tax triggered by a gift during a three-year look-forward period

    • All gift taxes paid by the decedent on gifts made within five years of the date of death must be included in the gross estate

    • 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

    • All are false

    Correct Answer
    A. 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
    Explanation
    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.

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  • 45. 

    Four years ago, David gave land to Mike that he purchased for $70,000, which is presently worth $100,000. Three years ago, Mike exchanged the land (then worth $150,000) along with a $100,000 cash contribution made by David for a new piece of land worth $250,000. The new land is titled with David and Mike as joint tenants with the right of survivorship. When Mike dies this year the land is worth $300,000. Mike's estate will includ

    • $0

    • $150,000

    • $180,000

    • $300,000

    Correct Answer
    A. $0
    Explanation
    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.

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  • 46. 

    Identify which of the following statements is false

    • Use valuation is available for farm land to help alleviate liquidity problems

    • Transferee is liable for the generation skipping transfer tax (GSTT) in the case of a direct skip

    • The generation skipping transfer tax (GSTT) is imposed to assure that some form of transfer taxation is imposed once a generation

    • A direct skip skips one or more generations

    Correct Answer
    A. Transferee is liable for the generation skipping transfer tax (GSTT) in the case of a direct skip
    Explanation
    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.

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  • 47. 

    Four years ago Roper transferred to his son ownership of a $100,000 life insurance policy that Roper purchased on his own life in 2000. The cash value of the policy on the transfer date was $25,000. Roper died on March 1 of this year. The amount included in Roper's gross estate due to the life insurance policy is:

    • $0

    • $25,000

    • $35,000

    • $100,000

    Correct Answer
    A. $0
    Explanation
    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.

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  • 48. 

    For 2009, the unified credit is equivalent to a statutory exemption of

    • $1,000,000.

    • $1,500,000.

    • $780,800.

    • $3,500,000

    Correct Answer
    A. $3,500,000
    Explanation
    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.

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  • 49. 

    Reversionary interests in publicly traded stocks included in a gross estate must be valued:

    • By an independent actuary

    • By an appraiser

    • By considering the fact that the transferor has died

    • Using actuarial tables

    Correct Answer
    A. Using actuarial tables
    Explanation
    Reversionary interests in publicly traded stocks included in a gross estate must be valued using actuarial tables. Actuarial tables are used to calculate the present value of future cash flows, taking into account factors such as the life expectancy of the individual and expected investment returns. This method provides a more accurate assessment of the value of the reversionary interests, considering the time value of money and the uncertainty of future events. Appraisers may be used to determine the fair market value of the stocks, but actuarial tables are specifically required for valuing reversionary interests.

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Quiz Review Timeline (Updated): Mar 19, 2023 +

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  • Current Version
  • Mar 19, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Dec 08, 2010
    Quiz Created by
    Advanced_tax
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