American College American College Certifications HS-330 Questions & Answers

• Question 151:

  Which of the following statements concerning the so-called "kiddie-tax" on unearned income of children under age 14 is (are) correct?

  1.

  The rules apply to earned income of the children.

  2.

  The rules apply to trust income received by a child under age 14 only if the trust was established by the child's parents.

  A. Both 1 and 2

  B. 2 only

  C. Neither 1 nor 2

  D. 1 only

  Correct Answer: C

• Question 152:

  Which of the following transfers will be successful in removing property from a grantor's gross estate?

  1.

  A grantor's transfer of property to a revocable trust if the grantor lives three years after the transfer.

  2.

  A grantor's transfer of a personal residence to a qualified personal residence trust if the grantor survives the retained interest term.

  A. 1 only

  B. Both 1 and 2

  C. Neither 1 nor 2

  D. 2 only

  Correct Answer: D

• Question 153:

  Harry, Barry, and Carrie incorporated their business, HBC and received 150 shares of stock each. They entered into a cross-purchase buy-sell agreement at this time. The agreement binds their estates to sell their shares of stock to the surviving shareholders. Each shareholder also agrees to purchase one-half of the shares held by the estate of the deceased shareholder. Assume Barry dies sometime later. Which of the following statements concerning this arrangement is (are) correct?

  1.

  When the agreement is carried out, HBC will have 300 shares of stock outstanding.

  2.

  Barry's estate will have additional liquidity to meet expenses and distribution requirements.

  A. 2 only

  B. Both 1 and 2

  C. 1 only

  D. Neither 1 nor 2

  Correct Answer: A

• Question 154:

  All the following statements concerning a power of appointment are correct EXCEPT:

  A. The appointee of a power of appointment is the party who exercises the power.

  B. The possible recipients of property after the exercise of a power of appointment depend on the terms of the power.

  C. Failure to exercise a power of appointment is known as a lapse of the power.

  D. The donee of a power of appointment might be restricted with respect to the time the power can be exercised.

  Correct Answer: A

• Question 155:

  Mr. Allen died early this year survived by his spouse Mrs. Allen. Among the items of family property are:

  1.A $200,000 life insurance policy on Mr. Allen's life with Mrs. Allen designated as beneficiary. Mrs. Allen has been the owner of the policy ever since it was issued 4 years ago.

  2.The family residence with a fair market value of $300,000. Mr. and Mrs. Allen own the residence jointly with the right of survivorship even though Mr. Allen purchased it with his separate funds.

  3.A $20,000 bank account. Mr. and Mrs. Allen own the account jointly with the right of survivorship even though Mrs. Allen made all the deposits.

  What amount of the family property will be included in Mr. Allen's gross estate for federal estate tax purposes?

  A. $350,000

  B. $300,000

  C. $360,000

  D. $160,000

  Correct Answer: D

• Question 156:

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

  1.

  All income must be distributed as earned to the person or persons who are beneficiaries of the trust.

  2.

  Principal and income may be distributed to a qualified charity.

  A. Both 1 and 2

  B. Neither 1 nor 2

  C. 1 only

  D. 2 only

  Correct Answer: C

• Question 157:

  Mr. Barlow died early this year. Under the terms of his will he left all his real estate and tangible personal property to his son. All the remainder of his probate estate was left to his wife, Mrs. Barlow. The following is a list of Mr. Barlow's probate assets and their fair market values at the time of his death:

  -Commercial real estate $150,000

  -Furniture and fixtures 75,000

  -Listed common stock 300,000

  -

  Other securities 200,000

  A.

  $400,000

  B.

  $825,000

  C.

  $600,000

  D.

  $500,000

  Correct Answer: C

• Question 158:

  Which of the following items of property will be included in a decedent's gross estate for federal estate tax purposes?

  1.

  The value of property subject to a general power of appointment that the decedent possessed at death

  2.

  The value of all gratuitous lifetime transfers of property made within 3 years of death

  A. 1 only

  B. 2 only

  C. Neither 1 nor 2

  D. Both 1 and 2

  Correct Answer: A

• Question 159:

  Which of the following areas of consideration present common ethical issues for the estate planner?

  A. Contractuality

  B. Conformity

  C. Conservancy

  D. Cooperation

  Correct Answer: D

• Question 160:

  When the owner of a closely held business dies, the payment of a portion of the federal estate tax may be deferred for a period of several years if the estate otherwise qualifies under the provisions of IRC Section 6166. Which of the following statements concerning this deferral of federal estate tax is correct?

  A. The interest rate on the deferred tax is determined by the prime rate in effect on the date of death.

  B. The interest on the unpaid estate tax is payable over the first 10 years, after which the tax plus interest on the balance is payable in equal installments for the last 5 years.

  C. Under certain circumstances, the estate will forfeit its right to tax deferral, and all the remaining unpaid estate tax will become due and payable immediately.

  D. To qualify for the tax deferral, the closely held business must represent more than 50 percent of the value of the decedent's adjusted gross estate.

  Correct Answer: C