Question 1

Five years ago, Emma purchased a residence and listed ownership as tenants by the entirety with her husband, Lucas. In the current year, Lucas predeceases Emma. Nothing is included in either the gross estate or probate estate of Lucas.

Accepted Answer

The answer of Five years ago, Emma purchased a residence...

Question 2

Which, if any, of the following statements reflects the correct tax valuation rules?

Accepted Answer

Sentimental value should not be considered when determining the tax valuation of tangible personalty. The value should be based on objective factors such as market value and condition, not subjective emotional attachment. The other statements are not entirely accurate. Classified listings can sometimes provide a rough estimate of value, the value of a note receivable can depend on its maturity date and interest rate, and the geographical location of property can affect its value.

Question 3

For the IRS to grant a discretionary extension of time to pay estate taxes (under § 6161), the executor must show that the estate would otherwise undergo undue hardship.

Accepted Answer

The answer of For the IRS to grant a discretionary...

Question 4

By maximizing the marital deduction, any estate tax is postponed until the death of the surviving spouse.

Accepted Answer

Maximizing the marital deduction allows for the unlimited transfer of assets between spouses tax-free, which can postpone any estate tax until the death of the surviving spouse.

Question 5

Under proper circumstances, a disclaimer by an heir may increase the charitable deduction allowed a decedent.

Accepted Answer

If an heir disclaims his or her inheritance and the disclaimed property passes to a qualified charitable organization, the estate may be entitled to a charitable deduction for the value of the property.

Question 6

A decedent owned 25% of the voting stock of Siskin Corporation. Siskin has 53 shareholders. The decedent's estate cannot qualify for the § 6166 election.

Accepted Answer

The § 6166 election allows for the deferral of estate tax payments for closely held businesses if the decedent owned at least 20% of the voting stock or if the corporation has 45 or fewer shareholders. Since the decedent owned 25% of the voting stock, the estate can qualify for the election despite the number of shareholders.

Question 7

Which, if any, of the following factors should reduce the value of a note receivable included in the gross estate of the holder?

Accepted Answer

The answer of Which, if any, of the following factors...

Question 8

Which of the following independent statements correctly reflects the valuation rules applicable to estate and gift taxes?

Accepted Answer

The interpolated terminal reserve is used to value unmatured life insurance policies for estate and gift tax purposes.

Question 9

Because of the estate tax deduction, a testamentary bequest to charity is preferable to a lifetime transfer.

Accepted Answer

A lifetime transfer to charity can provide immediate income tax deductions, while a testamentary bequest only provides estate tax deductions. The preference depends on individual circumstances and tax planning goals.

Question 10

Paula owns an insurance policy on her life payable to her estate. On Paula's death, the insurance proceeds are included in her gross estate and her probate estate.

Accepted Answer

If Paula owns an insurance policy on her life payable to her estate, the proceeds from the policy will be included in her gross estate and her probate estate upon her death. This means that the value of the policy will be subject to estate taxes and will be distributed according to the terms of her will or intestacy laws.

Question 11

During 2016, it is possible for a surviving spouse to have an exclusion amount of as much as $10.9 million.

Accepted Answer

This is true as the federal estate tax exclusion amount for 2016 is $5.45 million per individual, but a surviving spouse can use any unused portion of their deceased spouse's exclusion amount, potentially allowing for a total exclusion amount of $10.9 million.

Question 12

Derrick dies, and under the terms of his will, all of his property passes outright to Dionne (Derrick's surviving wife). Under these circumstances, there is no need for Derrick's executor to make a QTIP election.

Accepted Answer

A QTIP (Qualified Terminable Interest Property) election is only necessary when the decedent's property passes to a trust for the benefit of the surviving spouse rather than outright ownership by the surviving spouse. In this case, Derrick's property passes outright to his surviving wife Dionne, so there is no need for an election.

Question 13

Violet sells a parcel of land (basis of $100,000; fair market value of $300,000) to her church for $100,000. Violet is allowed a charitable income tax deduction of $200,000.

Accepted Answer

When Violet sells the parcel of land to her church for $100,000, she is making a charitable contribution of $200,000 ($300,000 fair market value minus $100,000 sales price). As a result, she can take a charitable income tax deduction of $200,000 on her tax return.

Question 14

Which, if any, are characteristics of the valuation tables issued by the IRS?

Accepted Answer

To use the tables, the Federal mid-term interest rate for the month of the transfer must be known.

Question 15

Harvey owns a certificate of deposit listed as: "Harvey, payable on proof of death to April." On Harvey's prior death, the CD is not subject to probate.

Accepted Answer

The CD is designed to bypass probate and pay out directly to April upon proof of Harvey's death.

Question 16

A disclaimer by a surviving spouse will generate additional estate tax because it reduces the amount of marital deduction allowed.

Accepted Answer

A disclaimer by a surviving spouse does not generate additional estate tax because it typically redirects assets to a contingent beneficiary, such as a trust, in a manner that still allows for estate tax planning benefits, such as the use of the marital deduction if structured properly.

Question 17

At the time of Elijah's death, he owned stock in Grey Corporation. The stock is traded on a local exchange with the most recent selling prices as follows. $\begin{array}{lc} 
&\text { Per Share }\
& \text { Price } \
\text { Four trading days prior to Elijah's death } & \$ 120 \
\text { Six trading days affer Elijah's death } & 100
\end{array}$  Presuming no alternate valuation date election, Elijah's gross estate should include a per share value of:

Accepted Answer

The answer of At the time of Elijah's death, he...

Question 18

Herbert leaves one-half of his estate to his wife, Ramona, and the remainder to a qualified charity. Herbert's estate taxes will not be reduced if Ramona disclaims her interest in favor of the charity.

Accepted Answer

Disclaiming her interest in favor of the charity means Ramona will not receive any portion of the estate, thus there will be no reduction in estate taxes. Therefore, Herbert's estate taxes will not be reduced if Ramona disclaims her interest in favor of the charity.

Question 19

In satisfying the more-than-35% test for qualification under § 6166, interests in multiple closely held businesses are aggregated when the decedent's gross estate includes 20% or more of the value of each such business.

Accepted Answer

When the decedent's gross estate includes 20% or more of the value of each closely held businesses, those interests are aggregated for the purpose of satisfying the 35% test for qualification under § 6166.

Question 20

Under Cindy's will, her share of their community property passes to Van, her surviving spouse. Cindy's property is subject to probate.

Accepted Answer

Since Cindy's property is subject to probate, it means that her will governs the distribution of her share of community property, and Van will receive it as her surviving spouse.

Quiz 19: Family Tax Planning