American College American College Certifications HS-330 Questions & Answers

• Question 321:

  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. Neither 1 nor 2

  C. 1 only

  D. 2 only

  Correct Answer: B

• Question 322:

  Which of the following life insurance settlement options will qualify for the federal estate tax marital deduction?

  1.

  Proceeds left to the surviving spouse under the interest option, with interest payable to the surviving spouse who has the unrestricted right to withdraw proceeds and with any proceeds not withdrawn payable equally to her children per stirpes

  2.

  Proceeds left to the surviving spouse under an installment option, with any installments remaining at her death to be commuted and paid to her estate

  A. Both 1 and 2

  B. 1 only

  C. 2 only

  D. Neither 1 nor 2

  Correct Answer: A

• Question 323:

  Which of the following types of partial interests in property may be allowed a charitable deduction for estate tax purposes?

  1.

  A remainder interest in the donor vacation home

  2.

  A testamentary gift of a percentage of a decedent entire interest in property held in trust

  A. Neither 1 nor 2

  B. Both 1 and 2

  C. 1 only

  D. 2 only

  Correct Answer: C

• Question 324:

  To determine whether a taxable gift has been made, the IRS focuses on all the following factors EXCEPT:

  A. Was the value of the gift property in excess of the annual per-donee exclusion?

  B. Was the property transferred for less than an adequate and full consideration in money or money's worth?

  C. Was the transferred property real property or personal property?

  D. Did the donor absolutely, irrevocably, and currently divest himself of dominion and control over the property?

  Correct Answer: C

• Question 325:

  In addition to substantial probate assets, a married man with two minor children has a $1,000,000 ordinary life insurance policy payable to his estate. He wants to make certain that if he predeceases his wife the death proceeds will be available to provide income for his wife during her lifetime and to provide for their two children after her death. He would like the policy and/or its death proceeds to be as free of federal gift and estate taxes as possible with respect to both him and his wife. Which of the following courses of action would best accomplish these objectives?

  A. Assign the policy to an irrevocable inter vivos trust with five and five powers and designate the trustee to receive the death proceeds

  B. Assign the policy to his wife who will establish a revocable inter vivos trust to receive the death proceeds

  C. Establish a revocable inter vivos trust and designate the trustee to receive death proceeds

  D. Designate his wife as beneficiary and she will establish a testamentary trust in her will to receive the proceeds at her subsequent death

  Correct Answer: A

• Question 326:

  Which of the following statements concerning both estates and complex trusts is correct?

  A. Both are required to file income tax returns.

  B. Both are monitored by the courts.

  C. Both must have more than one beneficiary.

  D. Both come into being by operation of law.

  Correct Answer: A

• Question 327:

  Which of the following terms applies to the blending together of separate and community properties of spouses in community-property states?

  A. Proration

  B. Inception

  C. Commingling

  D. Transmutation

  Correct Answer: C

• Question 328:

  Which of the following statements concerning a general power of appointment is (are) correct?

  1.

  A general power of appointment is a power over property so broad that it approaches actual ownership or control over the property subject to the power.

  2.

  The property subject to a general power of appointment will be includible in the gross estate of the holder of the power if held until death.

  A. Both 1 and 2

  B. Neither 1 nor 2

  C. 2 only

  D. 1 only

  Correct Answer: A

• Question 329:

  On January 1, 2004 a father gave his daughter a $150,000 straight (ordinary) life insurance policy on his life. Premiums are paid annually. The pertinent facts about the policy are: Date of issue: July 1, 1992

  Premium paid on July 1, 2003 $2,400 Terminal reserve on July 1, 2003 15,000 Terminal reserve on July 1, 2004 18,000

  What is the value of the policy for federal gift tax purposes?

  A. $16,200

  B. $150,000

  C. $17,700

  D. $17,400

  Correct Answer: C

• Question 330:

  Which of the following statements concerning an installment sale is (are) correct?

  1.

  Some portion of the purchase price must be paid in any one taxable year other than the year of sale.

  2.

  Installments due after the seller's death are excludible from the seller's gross estate.

  A. Both 1 and 2

  B. 1 only

  C. 2 only

  D. Neither 1 nor 2

  Correct Answer: B