American College American College Certifications HS-330 Questions & Answers

• Question 121:

  All the following factors are important in assessing liquidity needs in estate planning EXCEPT the

  A. ages of the residuary estate beneficiaries

  B. types of assets that comprise the estate

  C. marital status of the testator

  D. projected estate tax liability

  Correct Answer: A

• Question 122:

  A widower dies leaving a net probate estate of $300,000. At the time of his death, his descendants are as follows:

  A son, Joe, who has no children;

  A deceased daughter, Mary, whose two children, Irene and Sally, survive; and

  A daughter, Anne, who has one child, Harry

  Assuming that the widower's will provides for the distribution of his assets in equal shares to his children,

  per stirpes, which of the following correctly states the amounts each descendant will receive?

  A. $60,000 to Joe, $60,000 to Irene, $60,000 to Sally, $60,000 to Anne, and $60,000 to Harry

  B. $100,000 to Joe, $50,000 to Irene, $50,000 to Sally, $50,000 to Anne, and $50,000 to Harry

  C. $75,000 to Joe, $75,000 to Irene, $75,000 to Sally, and $75,000 to Anne

  D. $100,000 to Joe, $50,000 to Irene, $50,000 to Sally, and $100,000 to Anne

  Correct Answer: D

• Question 123:

  Which of the following acts by a person other than a lawyer is (are) clearly an unauthorized practice of law?

  1.

  A trust officer gives a client advice about the taxation of a trust.

  2.

  A CPA designs an estate plan for presentation to a client.

  A. 1 only

  B. 2 only

  C. Neither 1 nor 2

  D. Both 1 and 2

  Correct Answer: C

• Question 124:

  Alan, a widower, is a retired executive with substantial assets. He wishes to provide for the financial security of his two grandchildren since their father, Alan's son, has always managed money poorly. This year Alan would like to provide each grandchild with a substantial gift. Which of the following statements concerning the impact of the generation-skipping transfer tax (GSTT) on these transfers is correct?

  A. A direct gift of $1.5 million to each grandchild made during Alan's lifetime is exempt from GSTT.

  B. Any GSTT applicable to the gifts is imposed at a marginal rate based on Alan's wealth.

  C. Federal estate or gift tax will also be imposed on the gifts that are subject to the GSTT.

  D. Alan could avoid all GSTT by holding all his property until death and providing direct bequests for the grandchildren in his will.

  Correct Answer: C

• Question 125:

  The federal gift tax is

  A. a tax on the right of the donee to receive the property

  B. levied directly on the gift

  C. a flat tax based on gifts made in any taxable year

  D. a tax on the right of the donor to make the gift

  Correct Answer: D

• Question 126:

  Which of the following acts by a person other than a lawyer is (are) clearly an unauthorized practice of law?

  1.

  A trust officer gives a client advice about the taxation of a trust.

  2.

  A CPA designs an estate plan for presentation to a client.

  A. Neither 1 nor 2

  B. 1 only

  C. 2 only

  D. Both 1 and 2

  Correct Answer: A

• Question 127:

  All of the following statements concerning the use of an irrevocable life insurance trust to solve liquidity problems of the insured's estate are correct EXCEPT:

  A. The grantor should avoid obtaining incidents of ownership in the policy.

  B. The grantor is the most appropriate choice for trustee.

  C. Gift taxes can be avoided for premium contributions made by the grantor.

  D. The grantor can avoid inclusion of the corpus in his or her gross estate.

  Correct Answer: B

• Question 128:

  A married man is the sole owner of a small business with an estate tax value of $500,000. In addition, he and his wife own an office building as joint tenants with right of survivorship which they purchased five years ago. The building has an estate tax value of $1,500,000. They are considering dissolving the joint tenancy and retitling the building in the name of the husband as sole owner. Which of the following statements concerning this action is (are) correct?

  1.

  If the husband dies first, it would be easier to qualify his estate for a Section 303 redemption of his business interest.

  2.

  If the husband dies first, the probate costs of his estate could be increased.

  A. Neither 1 nor 2

  B. 1 only

  C. Both 1 and 2

  D. 2 only

  Correct Answer: D

• Question 129:

  Which of the following statements concerning a grantor-retained annuity trust (GRAT) is (are) correct?

  1.

  The grantor is taxed on trust income during the retained term.

  2.

  The grantor makes an irrevocable transfer to the remainderperson(s) when the trust is created.

  A. Neither 1 nor 2

  B. 2 only

  C. 1 only

  D. Both 1 and 2

  Correct Answer: D

• Question 130:

  A wealthy individual might consider selling a substantially appreciated property interest in an installment sale for which of the following reasons?

  1.

  To spread the taxable gain inherent in the property over the period of the installments

  2.

  To provide a buyer who lacks the requisite funds for a lump-sum purchase with the ability to finance the acquisition

  A. 2 only

  B. Both 1 and 2

  C. Neither 1 nor 2

  D. 1 only

  Correct Answer: B