American College American College Certifications HS-330 Questions & Answers

• Question 141:

  All the following items will be included in a decedent's gross estate at their date of death value for federal estate tax purposes EXCEPT

  A. a no-refund life annuity payable to the decedent that was purchased by the decedent from a life insurance company

  B. a gratuitous lifetime transfer of property in which the decedent retained the power to revoke the transfer with the consent of another person

  C. a gratuitous transfer of property taking effect at the decedent's death

  D. a gratuitous lifetime transfer in which the decedent retained a reversionary interest on the date of death equivalent to more than 5 percent of the value of the property

  Correct Answer: A

• Question 142:

  The failure of an individual to have a will can result in all the following EXCEPT:

  A. A surviving spouse receives only his or her elective share.

  B. The decedent's state of domicile might receive the property left by the decedent.

  C. Unnecessary death taxes may be imposed.

  D. Testamentary gifts to charity cannot be made.

  Correct Answer: A

• Question 143:

  Which of the following statements concerning the methods of valuing a closely held business for federal estate tax purposes is (are) correct?

  1.

  The capitalization-of-adjusted-earnings method uses a capitalization rate that varies inversely with the degree of risk and rate of return.

  2.

  The adjusted-book value method involves adjusting the asset components of a business to an approximate fair market value for each component.

  A. 2 only

  B. 1 only

  C. Both 1 and 2

  D. Neither 1 nor 2

  Correct Answer: C

• Question 144:

  Which of the following statements concerning filing the federal estate tax return is (are) correct?

  1.

  The estate tax return must be filed within 9 months of death unless an extension is granted by the IRS.

  2.

  For persons dying this year, an estate tax return must be filed for gross estates plus adjusted taxable gifts that exceed $1.5 million.

  A. Neither 1 nor 2

  B. 2 only

  C. 1 only

  D. Both 1 and 2

  Correct Answer: D

• Question 145:

  All the following are characteristics of a buy-sell agreement EXCEPT

  A. It provides for the continuation of the business

  B. It provides liquidity for estate settlement needs

  C. It provides a market for the business

  D. It provides for easier probating of the business

  Correct Answer: D

• Question 146:

  All the following are grounds for contesting a will EXCEPT:

  A. The widow was bequeathed less than her intestate share.

  B. The instrument is a forgery.

  C. The testator did not have testamentary capacity.

  D. The testator executed a later valid will.

  Correct Answer: A

• Question 147:

  To qualify the seller of property for installment sale tax treatment, the transaction must meet which of the following conditions?

  A. There must be no more than ten installments.

  B. All installments must be in equal amounts of principal.

  C. At least 30 percent of the purchase price must be paid in the year of sale.

  D. The entire purchase price must not be paid in the taxable year of sale.

  Correct Answer: D

• Question 148:

  A wife with substantial property in her own name would like to provide for her husband in the event of her prior death but does not want him to be able to leave her property to a second wife if he remarries. She would also like to take advantage of the marital deduction to save federal estate taxes. Her attorney has advised her that qualified terminable interest property (QTIP) will accomplish her objectives. To qualify such property for the marital deduction, all the following requirements must be met EXCEPT:

  A. An irrevocable election must be made by the decedent's executor to have the property includible in the surviving spouse's gross estate.

  B. The surviving spouse must be given a general power to appoint each year at least $5,000 or 5 percent of the value of the property.

  C. The property must have been included in the decedent's gross estate for federal estate tax purposes.

  D. The surviving spouse must be given a lifetime right to receive all the property's income at least annually.

  Correct Answer: B

• Question 149:

  All the following statements concerning guardians for minors are correct EXCEPT:

  A. A guardian has equitable title to the property he administers for the minor.

  B. A guardian named in a deceased parent's will is not necessarily binding on the court.

  C. A guardian of the person of a minor may not necessarily be the guardian of the minor's property.

  D. A special guardian can be appointed by the court to protect a minor's rights in a legal proceeding.

  Correct Answer: A

• Question 150:

  A man is planning to establish and fund a 20-year irrevocable trust for the benefit of his two sons, aged 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 the best choice of trustee?

  A. A bank or trust company

  B. The grantor's 70-year-old father

  C. The grantor of the trust

  D. The grantor's 22-year-old son

  Correct Answer: A