Quiz On Account Statement: Trivia Exam!
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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.
- 1.
Identify which of the following statements is true.
- A.
The tax base for the federal estate tax is the total of the decedent's taxable estate and post-1976 taxable gifts
- B.
Property included in a decedent's gross estate consists of only that property to which the decedent held title
- C.
Funeral expenses are not deductible from the gross estate
- D.
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 giftsExplanation
Page Ref.: C:13-2Rate this question:
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- 2.
Martin transfers stock to an irrevocable trust and names himself to receive the trust income for life with the remainder interest gifted to his son. When Martin dies
- A.
None of the stock will be included in Martin's estate
- B.
The stock's value at the time of transfer to the trust will be included in Martin's estate
- C.
The value of the stock less the present value of the income receivable by Martin will be included in Martin's estate
- D.
The value of the stock at death will be included in Martin's estate
Correct Answer
D. The value of the stock at death will be included in Martin's estateExplanation
Page Ref.: C:13-2Rate this question:
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- 3.
Which of the following is deductible in arriving at the amount of the taxable estate.
- A.
Expenses incurred in administering the estate
- B.
Casualty losses that occurred while administering the estate
- C.
Charitable contributions
- D.
All of the above
Correct Answer
D. All of the aboveExplanation
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.Rate this question:
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- 4.
For 2009, the unified credit is equivalent to a statutory exemption of
- A.
$1,000,000.
- B.
$1,500,000.
- C.
$780,800.
- D.
$3,500,000
Correct Answer
D. $3,500,000Explanation
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.Rate this question:
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- 5.
Identify which of the following statements is true.
- A.
The unified credit is the only credit common to both the gift and estate tax computation.
- B.
For estate tax purposes, publicly traded stocks are valued at their closing price on the date of death
- C.
Stocks traded on a stock exchange are valued at closing price for the date of death unless the alternate valuation date is elected
- D.
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.Rate this question:
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- 6.
The FMV of an asset for gift or estate tax purposes is the same except for
- A.
Marketable securities
- B.
Land.
- C.
Life insurance policies
- D.
Patents.
Correct Answer
C. Life insurance policiesExplanation
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.Rate this question:
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- 7.
Brent, who died on January 10, owned 10 shares of Potts Corporation stock. The closest trading dates to January 10 are January 8 (two working days before the date of death) and January 11 (one working day after the date of death). On January 8, the stock traded at a high of 101 and a low of 97 while on January 11 the high was 90 and the low was 86. The date-of-death per-share value is
- A.
$99.00.
- B.
$95.33
- C.
$93.50
- D.
$91.67
Correct Answer
D. $91.67Explanation
Explanation:
D) (101 + 97) × 0.50 = 99; (90 + 86) × 0.50 = 88
= $91.67
Page Ref.: C:13-6; Example C:13-7Rate this question:
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- 8.
The value of the stock that is not publicly traded may be determined by considering:
- A.
The nature and history of the business
- B.
Earning capacity.
- C.
Dividend paying capacity.
- D.
All of the above
Correct Answer
D. All of the aboveExplanation
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.Rate this question:
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- 9.
Appraisal methods used to value real estate for estate tax purposes may include:
- A.
Comparable sales
- B.
Reproduction cost
- C.
Capitalization of earnings
- D.
All of the above
Correct Answer
D. All of the aboveExplanation
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.Rate this question:
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- 10.
Reversionary interests in publicly traded stocks included in a gross estate must be valued:
- A.
By an independent actuary
- B.
By an appraiser
- C.
By considering the fact that the transferor has died
- D.
Using actuarial tables
Correct Answer
D. Using actuarial tablesExplanation
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.Rate this question:
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- 11.
The alternate valuation date is generally:
- A.
3 months after the date of death
- B.
6 months after the date of death
- C.
9 months after the date of death
- D.
12 months after the date of death
Correct Answer
B. 6 months after the date of deathExplanation
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.Rate this question:
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- 12.
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?
- A.
All interest and dividends received in year of death
- B.
Only interest and dividends received prior to the date of death
- C.
Only interest and dividends received after the date of death
- D.
None of the interest and dividends received
Correct Answer
B. Only interest and dividends received prior to the date of deathExplanation
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.Rate this question:
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- 13.
Identify which of the following statements is false
- A.
The "blockage" regulations allow the IRS to prevent the estate's executor from electing the alternate valuation date
- B.
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
- C.
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).
- D.
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 dateExplanation
The "blockage" regulations do not allow the IRS to prevent the estate's executor from electing the alternate valuation date.Rate this question:
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- 14.
The alternate valuation date can be elected for estate tax purposes only if the election.
- A.
Increases the value of the gross estate
- B.
Decreases the value of the gross estate (B)
- C.
Decreases the estate tax liability (after reduction for tax credits). (C)
- D.
Both B and C are required
Correct Answer
D. Both B and C are requiredExplanation
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.Rate this question:
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- 15.
Identify which of the following statements is true.
- A.
The alternate valuation date can be used for estate tax purposes only if the election increases the value of the gross estate
- B.
If the alternative valuation date is elected, changes in value that occur solely because of "mere lapse of time" must be ignored
- C.
Gross estate, a federal law concept, is generally smaller than the probate estate, a state law concept
- D.
All are false
Correct Answer
B. If the alternative valuation date is elected, changes in value that occur solely because of "mere lapse of time" must be ignoredExplanation
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.Rate this question:
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- 16.
Identify which of the following statements is true.
- A.
A curtesy interest is a widower's interest in his deceased wife's property
- B.
All gifts made within three years of the date of death must be included in the gross estate
- C.
Dower rights are not the same as curtesy rights
- D.
All are false
Correct Answer
A. A curtesy interest is a widower's interest in his deceased wife's propertyExplanation
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.Rate this question:
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- 17.
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?
- A.
Six months
- B.
One year
- C.
Three years
- D.
No minimum time period exists
Correct Answer
C. Three yearsExplanation
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.Rate this question:
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- 18.
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:
- A.
$0
- B.
$25,000
- C.
$35,000
- D.
$100,000
Correct Answer
A. $0Explanation
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.Rate this question:
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- 19.
On March 1 Sue transfers stock worth $20,000 to Frank. How long must Sue live to avoid inclusion of the $20,000 of stock in her gross estate?
- A.
Six months
- B.
One year
- C.
Three years
- D.
No minimum time period exists, but she must be alive at transfer of ownership
Correct Answer
D. No minimum time period exists, but she must be alive at transfer of ownershipExplanation
There is no minimum time period that Sue must live to avoid inclusion of the $20,000 of stock in her gross estate. However, she must be alive at the time of the transfer of ownership. This means that if Sue were to pass away before transferring the stock to Frank, it would be included in her gross estate.Rate this question:
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- 20.
The gross-up rule requires
- A.
All beneficial interests be included in the decedent's estate
- B.
Post-1976 gifts by the decedent be included in the decedent's estate
- C.
Certain gifts made by the decedent within three years of the date of death are included in the decedent's gross estate.
- D.
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
D. 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.Rate this question:
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- 21.
In February of the current year Tom dies. Two years and nine months before the date of death, Tom made a gift of stock valued at $2 million. Gift taxes paid on the transfer by Tom were $435,000 after reduction for a $345,800 unified credit ($780,800 - $345,800). At the time of his death the gifted stock was valued at $2.3 million. The amount included in Tom's gross estate from this transfer is
- A.
$2,000,000
- B.
$2,300,000
- C.
$435,000
- D.
None of the above
Correct Answer
C. $435,000Explanation
The amount included in Tom's gross estate from the transfer of the gifted stock is $435,000. This is because the value of the gifted stock at the time of Tom's death is used to determine the inclusion in his gross estate, regardless of the value at the time of the gift. The gift taxes paid on the transfer are not included in the gross estate. Therefore, the correct answer is $435,000.Rate this question:
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- 22.
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?
- A.
$0
- B.
$400,000
- C.
$1,000,000
- D.
$1,200,000
Correct Answer
D. $1,200,000Explanation
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.Rate this question:
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- 23.
Identify which of the following statements is true
- A.
The gross-up rule applies to the gift tax triggered by a gift during a three-year look-forward period
- B.
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
- C.
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
- D.
All are false
Correct Answer
C. 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 estateExplanation
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.Rate this question:
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- 24.
Identify which of the following statements is true
- A.
Reversionary interests of less than 5% are includible in the gross estate
- B.
A reversionary interest means a chance exists that the property may pass back to the transferor under the terms of the transfer
- C.
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
- D.
All are false
Correct Answer
B. A reversionary interest means a chance exists that the property may pass back to the transferor under the terms of the transferExplanation
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.Rate this question:
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- 25.
Dan transfers an apartment building to Grace but retains the right to the rental income for 10 years. Dan dies nine years after the transfer when the building is worth $600,000. The applicable federal rate is 10% and the reversionary actuarial factor is 0.30. How much would be included in Dan's estate?
- A.
$0
- B.
$150,000
- C.
$350,000
- D.
$600,00
Correct Answer
D. $600,00Explanation
Dan would include $600,000 in his estate. This is because he retained the right to the rental income for 10 years, which means he had an interest in the property at the time of his death. The value of that interest would be included in his estate for tax purposes.Rate this question:
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- 26.
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?
- A.
$0
- B.
$81,000
- C.
$100,000
- D.
$181,000
Correct Answer
B. $81,000Explanation
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.Rate this question:
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- 27.
Identify which of the following statements is false
- A.
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)
- B.
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.
- C.
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)
- D.
Statements A and C are true
Correct Answer
B. 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.Rate this question:
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- 28.
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?
- A.
$180,000
- B.
$0
- C.
$600,000
- D.
$420,000
Correct Answer
C. $600,000Explanation
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.Rate this question:
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- 29.
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?
- A.
$120,000
- B.
$180,000
- C.
$200,000
- D.
$300,000
Correct Answer
B. $180,000Explanation
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.Rate this question:
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- 30.
Following are the fair market values of Wilma's assets at her date of death: Personal effects and jewelry $150,000Land which Wilma bought and held as a jointtenant with right of survivorship with her sister 800,000 The executor of Wilma's estate did not elect the alternate valuation date. The amount includible in Wilma's gross estate is
- A.
$150,000
- B.
$550,000
- C.
$800,000
- D.
$950,000
Correct Answer
D. $950,000Explanation
The correct answer is $950,000. This is because the fair market value of Wilma's personal effects and jewelry is $150,000, and the fair market value of the land she held as a joint tenant with right of survivorship with her sister is $800,000. Therefore, the total amount includible in Wilma's gross estate is $150,000 + $800,000 = $950,000.Rate this question:
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- 31.
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
- A.
$0
- B.
$150,000
- C.
$180,000
- D.
$300,000
Correct Answer
A. $0Explanation
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.Rate this question:
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- 32.
In 1999, Roger gives stock valued at $100,000 to Martha. Roger and Martha are not related. In 2000, Martha uses the stock then valued at $110,000 as partial consideration to acquire realty costing $220,000. Pat (her brother) furnishes the remaining $110,000 of consideration. The realty is titled in the names of Martha and Pat as joint tenants with right of survivorship. This year, Martha dies and Pat survives. The realty is valued at $300,000 at Martha's death. How much, if any, of the realty's value will be included in Martha's estate?
- A.
$0
- B.
$110,000
- C.
$150,000
- D.
$300,000
Correct Answer
C. $150,000Explanation
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.Rate this question:
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- 33.
Identify which of the following statements is true
- 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
- B.
Special powers of appointment give the power holder less restricted powers than a general power of appointment
- C.
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
- D.
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 spouseExplanation
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.Rate this question:
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- 34.
Proceeds of a life insurance policy payable to the estate's executor, as the estate's representative, are
- A.
Includible in the decedent's gross estate only if the premiums had been paid by the insured
- B.
Includible in the decedent's gross estate only if the policy was taken out within three years of the insured's death
- C.
Never includible in the decedent's gross estate.
- D.
Always includible in the decedent's gross estate
Correct Answer
D. Always includible in the decedent's gross estateExplanation
The correct answer is "always includible in the decedent's gross estate." This means that regardless of who paid the premiums or when the policy was taken out, the proceeds of a life insurance policy will always be included in the decedent's gross estate. This is important for tax purposes and determining the value of the estate.Rate this question:
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- 35.
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
- A.
$0
- B.
$50,000
- C.
$150,000
- D.
$166,667
Correct Answer
B. $50,000Explanation
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.Rate this question:
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- 36.
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
- A.
$3,600,000
- B.
$2,000,000
- C.
$1,800,000
- D.
$0
Correct Answer
A. $3,600,000Explanation
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.Rate this question:
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- 37.
Ted died on May 3. At the time of his death, he owned a beach house valued at $250,000. On June 10, the beach house was completely destroyed by a hurricane and there was no insurance coverage. If the executor elects to use the alternate valuation date, the executor wil
- A.
Include the beach house in the gross estate at $250,000
- B.
Take a casualty loss of $250,000 on the estate tax return
- C.
Take a casualty loss of $250,000 on the estate's income tax return.
- D.
Include the beach house in the gross estate at $0.
Correct Answer
D. Include the beach house in the gross estate at $0.Explanation
The correct answer is to include the beach house in the gross estate at $0. This is because the alternate valuation date is used for estate tax purposes, and it is six months after the date of death. Since the beach house was destroyed by a hurricane after Ted's death and there was no insurance coverage, its value at the alternate valuation date would be $0. Therefore, the executor would include the beach house in the gross estate at $0 for estate tax purposes.Rate this question:
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- 38.
Identify which of the following statements is true
- A.
Administrative expenses are not deductible on the estate's income tax return.
- B.
Casualty or theft losses incurred during the administration of the estate are not deductible on the estate tax return.
- C.
There is a limitation of $100,000 on the charitable contribution deduction for estate tax purposes
- D.
All are false
Correct Answer
D. All are falseExplanation
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.Rate this question:
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- 39.
Identify which of the following statements is true
- 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
- B.
There is a ceiling on the marital deduction
- C.
All transfers to the surviving spouse are eligible for the marital deduction
- D.
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 organizationExplanation
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.Rate this question:
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- 40.
Identify which of the following statements is false
- A.
To qualify for the marital deduction, property must be includible in the decedent's gross estate
- B.
Is not eligible for the marital deduction if it passes to the spouse under the individual's dower rights
- C.
A terminable interest is one that ceases upon the passage of time or the occurrence of some event
- D.
Some, but not all, terminal interests qualify for the marital deduction
Correct Answer
B. Is not eligible for the marital deduction if it passes to the spouse under the individual's dower rightsExplanation
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.Rate this question:
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- 41.
Which of the following is not a test for an interest to qualify for the marital deduction?
- A.
The property must be included in the decedent's gross estate
- B.
If a QTIP transfer is made, the spouse must be entitled to all of the income at least annually for life
- C.
The interest conveyed must not be a nondeductible terminable interest
- D.
All of the above are required
Correct Answer
D. All of the above are requiredExplanation
All of the above are required to qualify for the marital deduction. The property must be included in the decedent's gross estate, meaning it must be part of the deceased person's assets at the time of their death. If a QTIP (Qualified Terminable Interest Property) transfer is made, the spouse must be entitled to all of the income at least annually for life. This ensures that the surviving spouse receives the income generated by the property. Additionally, the interest conveyed must not be a nondeductible terminable interest, meaning it cannot be a type of interest that is not eligible for the marital deduction.Rate this question:
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- 42.
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
- A.
$555,800
- B.
$780,800
- C.
$3,500,000
- D.
$2,000,000
Correct Answer
C. $3,500,000Explanation
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.Rate this question:
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- 43.
Which of the following credits is available for estate tax purposes?
- A.
Investment tax credit
- B.
Credit for income taxes paid on decedent's final return
- C.
Credit for estate taxes paid on certain prior transfers
- D.
All of the above
Correct Answer
C. Credit for estate taxes paid on certain prior transfersExplanation
The credit for estate taxes paid on certain prior transfers is available for estate tax purposes. This credit allows the estate to offset the estate tax liability by the amount of estate taxes paid on certain transfers made by the decedent within a specified time period before their death. This credit helps to avoid double taxation on the same assets and reduces the overall estate tax burden.Rate this question:
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- 44.
Which of the following is not a credit for purposes of computing the federal estate tax liability?
- A.
Credit for gift tax paid on pre-1977 gifts
- B.
Credit for estate taxes paid on certain prior transfers
- C.
A credit for foreign death taxes
- D.
All of the above are credits for the federal estate tax
Correct Answer
D. All of the above are credits for the federal estate taxExplanation
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.Rate this question:
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- 45.
Identify which of the following statements is true
- A.
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.
- B.
The credit for state death taxes has been replaced with a deduction for state estate taxes
- C.
The unified credit is the only credit allowed against the estate tax
- D.
All are false
Correct Answer
B. The credit for state death taxes has been replaced with a deduction for state estate taxesExplanation
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.Rate this question:
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- 46.
Identify which of the following statements is true
- A.
The credit for taxes paid on prior transfers does not reduce the impact of property being taxed in more than one estate in quick succession
- B.
The deduction for state death taxes is not limited
- C.
An estate is not entitled to a credit for foreign death taxes paid on property located in a foreign country and included in the gross estate
- D.
All are false
Correct Answer
B. The deduction for state death taxes is not limitedExplanation
The statement "The deduction for state death taxes is not limited" is true. This means that there is no cap or restriction on the amount of state death taxes that can be deducted from the gross estate for federal estate tax purposes. Therefore, the deduction for state death taxes can reduce the overall estate tax liability, potentially resulting in a lower tax burden for the estate.Rate this question:
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- 47.
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?
- A.
$350,000
- B.
$280,000
- C.
$210,000
- D.
$140,000
Correct Answer
A. $350,000 -
- 48.
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?
- A.
Claudia's estate receives no credit or deduction for the tax paid by Joe's estate
- B.
Claudia's estate receives a credit for $1,000,000 of Joe's estate tax.
- C.
Claudia's estate receives a credit for $2,000,000 of Joe's estate tax
- D.
Claudia's estate receives a deduction for $2,000,000 of Joe's estate tax
Correct Answer
C. Claudia's estate receives a credit for $2,000,000 of Joe's estate taxExplanation
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.Rate this question:
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- 49.
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?
- A.
$600,000
- B.
$1,100,000
- C.
$1,770,000
- D.
$2,270,000
Correct Answer
C. $1,770,000Explanation
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.Rate this question:
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- 50.
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
- A.
I, II and III
- B.
I, II
- C.
II, IV
- D.
III, IV
Correct Answer
B. I, IIExplanation
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.Rate this question:
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