American College American College Certification HS-330 Questions & Answers

• Question 1:

  Which of the following actions on the part of a trustee is (are) a breach of his duties?

  1.

  Placing substantial amounts of cash from the sale of securities in a noninterest bearing checking account for a period of years

  2.

  Investing all trust assets in securities that favor income beneficiaries to the detriment of remainderpersons

  A. 1 only

  B. Neither 1 nor 2

  C. Both 1 and 2

  D. 2 only

  Correct Answer: C

• Question 2:

  Which of the following statements concerning a simple trust is correct?

  A. Income and principal may be distributed to a qualified charity.

  B. Income is accumulated at the discretion of the trustee.

  C. It receives a special tax deduction for income distributed to its beneficiaries.

  D. It limits the number of permissible beneficiaries.

  Correct Answer: C

• Question 3:

  All the following statements concerning a federal estate tax deduction for a bequest or gift to a qualified charity are correct EXCEPT:

  A. A life insurance policy that was assigned to a charity as a gift less than 3 years prior to the insured's death qualifies for a charitable deduction.

  B. The amount of a charitable deduction may not exceed 50 percent of a decedent's adjusted gross estate.

  C. The amount of a charitable deduction is reduced by any taxes and administrative expenses chargeable against the bequest.

  D. An estate may deduct the value of the remainder interest in a charitable remainder trust.

  Correct Answer: B

• Question 4:

  The decedent, D, died this year. The facts concerning D estate are:

  -Gross estate $3,400,000

  -Marital deduction 0

  -Charitable deduction 600,000

  -Funeral and administration expenses 80,000

  -Gifts made after 1976 170,000

  -

  State death taxes payable 192,000

  A.

  $2,720,000

  B.

  $2,358,000

  C.

  $2,138,000

  D.

  $2,528,000

  Correct Answer: D

• Question 5:

  The personal representative of a decedent has the duty to file which of the following income tax returns?

  1.

  The decedent's final income tax return

  2.

  The estate's income tax return

  A. Both 1 and 2

  B. Neither 1 nor 2

  C. 2 only

  D. 1 only

  Correct Answer: A

• Question 6:

  All the following statements concerning transfers at death under a will are correct EXCEPT:

  A. Specific bequests of a decedent's property are satisfied prior to distribution of the decedent's residuary estate.

  B. The most appropriate way to sever a joint tenancy with right of survivorship is for the joint tenant-decedent to make a specific bequest of the property under a will.

  C. It is common for a will to contain a clause that exempts the executor from posting bond.

  D. If during lifetime a decedent disposed of property that was the subject of a specific bequest, ademption occurs.

  Correct Answer: B

• Question 7:

  A man is planning to establish and fund an irrevocable trust for the benefit of his two sons, ages 19 and 22, and plans to give the trustee power to sprinkle trust income. From the standpoint of providing federal income, gift, and estate tax savings, which of the following would be a suitable trustee?

  1.

  The grantor of the trust

  2.

  The grantor's 22-year-old son

  A. 2 only

  B. Both 1 and 2

  C. Neither 1 nor 2

  D. 1 only

  Correct Answer: C

• Question 8:

  A man established and funded an irrevocable trust and named a bank as trustee. All income from the trust is to be paid to his four grandchildren. Which of the following powers retained by the grantor of the trust will cause all or a portion of the trust assets to be includible in his gross estate for federal estate tax purposes?

  1.

  The power to add principal to the trust

  2.

  The power to vary the amounts of trust income paid to each grandchild

  A. 1 only

  B. 2 only

  C. Neither 1 nor 2

  D. Both 1 and 2

  Correct Answer: B

• Question 9:

  Which of the following statements concerning charitable remainder annuity trusts is correct?

  A. The interest paid to the charity must be paid at least quarterly.

  B. It provides a fixed annuity income interest to a qualified charity.

  C. The term of charitable remainder annuity arrangements is limited to 10 years.

  D. The donor receives an estate tax charitable deduction for the value of the remainder interest.

  Correct Answer: D

• Question 10:

  All the following statements concerning antenuptial agreements are correct EXCEPT:

  A. They can often deal with a surviving spouse's right to an intestate share of a deceased spouse's estate.

  B. They are frequently used prior to second marriages.

  C. They can protect the interests of children of former marriages.

  D. Income tax problems are avoided when property is transferred subject to such an agreement.

  Correct Answer: D