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. Neither 1 nor 2
B. Both 1 and 2
C. 1 only
D. 2 only
A father plans to create a trust for the benefit of his 22-year-old son and wishes to take advantage of the gift tax annual exclusion. He has named a bank as trustee. Which of the following trust provisions would cause the gifts to be ineligible to qualify for the gift tax annual exclusion?
1.
The trust income is to be paid to the son or accumulated at the discretion of the trustee.
2.
The income is to be accumulated until the son reaches age 32 when all accumulated income and principal are to be distributed to him.
A. Both 1 and 2
B. Neither 1 nor 2
C. 1 only
D. 2 only
Which of the following statements concerning property ownership by a married couple residing in a community-property state is correct?
A. All property owned by the couple is community property.
B. Property inherited by one spouse during a marriage becomes community property.
C. Community property loses its identity when a couple moves from a community-property state to a common-law state.
D. Income earned by one spouse becomes community property.
If a grantor establishes an irrevocable trust, the income of the trust will be taxed to the grantor if it is used to pay premiums for life insurance on the life of
A. a child of the grantor
B. the spouse of the grantor
C. a grandchild of the grantor
D. the father of the grantor
All the following statements concerning lifetime gifts are correct EXCEPT:
A. The amount of gift tax paid within 3 years of death is included in the gross estate.
B. If a wealthy widower lives more than 3 years after making a taxable gift to his sister, the value of the gift has no effect on his federal estate tax liability.
C. A substantial amount of property may be given away over a period of time without the imposition of the federal gift tax because of the annual exclusion.
D. Gifts of life insurance within 3 years of death are included in the donor-insured's gross estate.
A woman is the income beneficiary of an irrevocable trust. All the following powers held by her will cause all the assets in the trust to be includible in her gross estate for federal estate tax purposes EXCEPT
A. the testamentary power to direct the trustee to pay trust assets to her estate
B. the testamentary special or limited power to direct the trustee to distribute trust assets to her children
C. the testamentary power to direct the trustee to use trust assets to pay her estate taxes
D. the power to direct the trustee to distribute trust corpus to her
The federal gift tax is
A. levied directly on the gift
B. a flat tax based on gifts made in any taxable year
C. a tax on the right of the donee to receive the property
D. a tax on the right of the donor to make the gift
Generally all the following statements concerning life insurance arrangements for partnership buy- sell agreements are correct EXCEPT:
A. With an entity-purchase agreement the partnership strives to maintain face amounts of coverage equal to its obligations under the agreement.
B. With a cross-purchase agreement each partner purchases life insurance on the life of each of the other partners.
C. With an entity-purchase agreement the formula used for determining the number of life insurance policies needed is N (number of partners) + 1.
D. With a cross-purchase agreement the individual partners are the applicants, owners, beneficiaries and premium-payers of the policies.
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. $100,000 to Joe, $50,000 to Irene, $50,000 to Sally, $50,000 to Anne, and $50,000 to Harry
B. $60,000 to Joe, $60,000 to Irene, $60,000 to Sally, $60,000 to Anne, and $60,000 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
A father died leaving his property equally to his wealthy son and his poor daughter. The son wishes to disclaim his share of the inheritance so that it will pass to his sister without his incurring any gift tax liability. In this situation, all the following acts on the part of the son are required EXCEPT:
A. His refusal to accept the inheritance must be received by the executor of his father's estate within 9 months of his father's death.
B. His refusal to accept the inheritance must direct specifically that his sister is to receive it instead.
C. His refusal to accept the inheritance must be in writing.
D. He must not have received any part of his inheritance or any income from it prior to his refusal to accept it.
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