Question 1

Identify which of the following statements is true.

Accepted Answer

Special use valuation is a provision that is available for qualifying farmland or closely held business interests. This provision can help alleviate the liquidity problem that arises when the value of the farm or asset is included in the decedent's gross estate but the estate does not have enough liquid assets to pay the estate tax. The other statements are false: The transferee is not liable for GSTT in the case of a direct skip; Qualified disclaimers are available for estate planning purposes.

Question 2

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

Accepted Answer

Liquidity is the major problem facing executors in managing the estate. This refers to the ability to pay debts, taxes, and distribution to beneficiaries in a timely manner without selling estate assets at a loss. Identifying deductions, computing unified credit, and determining asset valuation methods are also important tasks for the executor, but they do not pose as big of a challenge as liquidity.

Question 3

Sasha gives $1,000,000 to her granddaughter.Sasha has used all of her unified credit and is in the 40% marginal gift tax bracket; ignore the annual exclusion and exemption.What is the amount of her tax on this transfer?

Accepted Answer

Since Sasha has used all of her unified credit and is in the 40% marginal gift tax bracket, the tax on the $1,000,000 gift would be 40% of $1,000,000, which equals $400,000.

Question 4

Guy died this year.His estate includes a closely held business interest valued at $400,000 and other property valued at $675,000.Guy's allowable Sec.2053 and 2054 deductions total $75,000.Within three years of death,partly in hopes of qualifying his estate for the installment payment allowed under Sec.6166 treatment,Guy made gifts of listed securities of $350,000 (at 2002 valuations)and paid no gift tax on the gift.Is Guy's estate eligible for Sec.6166 treatment?

Accepted Answer

The answer of Guy died this year.His estate includes a...

Question 5

Joe dies late in 2011 and his estate is subject to an estate tax of $2 million.He leaves all of his assets to his daughter,Claudia.Claudia dies in early 2013.Which of the following statements is correct?

Accepted Answer

The answer of Joe dies late in 2011 and his...

Question 6

Identify which of the following statements is false.

Accepted Answer

The transferor is liable for the generation-skipping transfer tax (GSTT) in the case of a direct skip.

Question 7

On December 1,1976,Bart made a gift and claimed a $30,000 specific exemption.When Bart died in 2008,his tax base was $2,000,000.Assuming the maximum unified credit is $780,800,what is the credit available when computing Bart's estate tax is what?

Accepted Answer

The answer of On December 1,1976,Bart made a gift and...

Question 8

Identify which of the following statements is true.

Accepted Answer

The answer of Identify which of the following statements is...

Question 9

Identify which of the following statements is true.

Accepted Answer

The answer of Identify which of the following statements is...

Question 10

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

Accepted Answer

A stock redemption under Sec.303 is treated as a sale or exchange of property for tax purposes. This means that any gain or loss realized on the redemption will be treated as a capital gain or loss, subject to the rules governing capital gains and losses. Alternatively, if the redemption is structured as a dividend, it would be taxed as ordinary income. However, in the case of Sec.303, the redemption is specifically designed to avoid this tax treatment and instead be treated as a sale or exchange of property.

Question 11

An executor may elect to postpone payment of the estate tax attributable to a remainder or reversionary interest until 6 months after the interests of the other person(s)terminate.

Accepted Answer

This is true according to section 6166 of the Internal Revenue Code.

Question 12

Identify which of the following statements is false.

Accepted Answer

The answer of Identify which of the following statements is...

Question 13

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

Accepted Answer

All the options listed (the estate's death taxes, funeral expenses, and administrative expenses) are considered in determining the maximum amount of stock redemption proceeds under Section 303. This section allows a portion of the stock in a closely held business to be redeemed by the estate without the redemption being treated as a dividend, to the extent of paying death taxes, funeral expenses, and administrative expenses.

Question 14

Yee made $3 million of taxable gifts in 1993 and paid gift taxes (less the unified credit)of $1,098,000.Yee died in 2013 with a taxable estate of $10,000,000.At current rates,the gift taxes payable on $3 million would be $1,145,800.Yee died in a year when the unified credit was $2,045,800.Determine her estate tax liability.

Accepted Answer

The answer of Yee made $3 million of taxable gifts...

Question 15

Compare the credits available for estate tax purposes with the credits available for gift tax purposes.What differences exist?

Accepted Answer

The answer of Compare the credits available for estate tax...

Question 16

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

Accepted Answer

All of the reasons listed are valid reasons for the IRS to extend the payment date for estate taxes, including a closely held business interest, a large remainder or reversionary interest, or reasonable cause shown by the executor of the estate.

Question 17

A qualified disclaimer is a valuable estate planning tool because

Accepted Answer

A qualified disclaimer allows the person who would receive the assets to refuse them, which is not treated as a gift made by the person who disclaims. This can be beneficial in estate planning by avoiding gift tax consequences and potentially allowing the disclaimed assets to pass to the intended recipient with more favorable tax treatment. However, it does not establish the value of the assets, qualify them for the alternative valuation date, or allow the person making the disclaimer to determine the recipient.

Question 18

Compare the tax treatment of administration expenses with that of the decedent's debts.

Accepted Answer

The answer of Compare the tax treatment of administration expenses...

Question 19

Lou dies on April 12,2011.All of Lou's property passed to Paula,his daughter.Paula dies on January 15,2013.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?

Accepted Answer

The answer of Lou dies on April 12,2011.All of Lou's...

Question 20

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

Accepted Answer

The GSTT's purpose is to impose some form of transfer tax one time a generation. It is designed to prevent individuals from avoiding estate and gift taxes by transferring their assets to their grandchildren or other beneficiaries who are more than one generation younger than them. The tax is imposed in addition to estate and gift taxes and is calculated at the highest estate tax rate.

Quiz 13: The Estate Tax

Identify which of the following statements is true.

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

Sasha gives $1,000,000 to her granddaughter.Sasha has used all of her unified credit and is in the 40% marginal gift tax bracket; ignore the annual exclusion and exemption.What is the amount of her tax on this transfer?

Joe dies late in 2011 and his estate is subject to an estate tax of $2 million.He leaves all of his assets to his daughter,Claudia.Claudia dies in early 2013.Which of the following statements is correct?

Identify which of the following statements is false.

On December 1,1976,Bart made a gift and claimed a $30,000 specific exemption.When Bart died in 2008,his tax base was $2,000,000.Assuming the maximum unified credit is $780,800,what is the credit available when computing Bart's estate tax is what?

Identify which of the following statements is true.

Identify which of the following statements is true.

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

An executor may elect to postpone payment of the estate tax attributable to a remainder or reversionary interest until 6 months after the interests of the other person(s)terminate.

Identify which of the following statements is false.

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

Compare the credits available for estate tax purposes with the credits available for gift tax purposes.What differences exist?

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

A qualified disclaimer is a valuable estate planning tool because

Compare the tax treatment of administration expenses with that of the decedent's debts.

Lou dies on April 12,2011.All of Lou's property passed to Paula,his daughter.Paula dies on January 15,2013.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?

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