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. All the following statements concerning this action are correct EXCEPT:
A. At the husband's death, his heirs would get a fully stepped-up tax basis for the property.
B. At the husband's death, it would be easier to qualify his estate for an IRC Section 303 stock redemption of his business interest.
C. If the husband dies first and leaves the office building outright to his wife, there would be no federal estate tax attributed to its inclusion in his gross estate.
D. If the husband dies first, the probate costs of his estate could be increased.
Which of the following statements concerning revocable trusts is correct?
A. Property of a revocable trust will be included in the grantor's probate property.
B. A transfer of income-producing property to a revocable trust will result in favorable income tax treatment for the grantor.
C. A transfer of property to a revocable trust is treated as a completed gift.
D. The transfer of property to a revocable trust is typically motivated by nontax reasons.
A married man died this year leaving a gross estate of $2,700,000. Some additional facts concerning his estate are:
-Administration expenses and debts $300,000
-Marital deduction 800,000
-
Applicable credit amount (2005) 555,800
-
Applicable exclusion amount (2005) 1,500,000
-
State death taxes payable 17,700
A.
$47,065
B.
$42,865
C.
0
D.
$37,035
Which of the following statements concerning the federal income taxation of estates is (are) correct?
1.
An estate is entitled to a personal exemption of $300 and a standard deduction.
2.
An estate is entitled to a tax deduction for amounts of income distributed.
A. 2 only
B. Both 1 and 2
C. 1 only
D. Neither 1 nor 2
In which of the following estates would it normally be most desirable to provide for a federal estate tax marital deduction for approximately one half of the property?
A. In the estate of the spouse with the bulk of the family wealth when only one spouse has substantial wealth
B. In the estate of the first spouse to die, regardless of the relative wealth of each spouse
C. In the estate of the first spouse to die when neither spouse has a substantial estate
D. In the estate of the spouse who does not have the bulk of the family wealth when only one spouse has substantial wealth
In which of the following situations will the grantor be taxed on income from trust property.
-The grantor of a trust gives one of the trust beneficiaries the right to add or delete beneficiaries.
-
An adverse party to the grantor holds the power to determine the timing of trust distributions to the beneficiaries.
A.
Neither 1 nor 2
B.
2 only
C.
1 only
D.
Both 1 and 2
In which of the following situations will the grantor be taxed on income from trust property.
-The grantor of a trust gives one of the trust beneficiaries the right to add or delete beneficiaries.
-
An adverse party to the grantor holds the power to determine the timing of trust distributions to the beneficiaries.
A.
2 only
B.
1 only
C.
Neither 1 nor 2
D.
Both 1 and 2
All the following statements concerning the generation-skipping transfer tax (GSTT) are correct EXCEPT:
A. The tax is imposed according to a graduated rate schedule similar to the federal estate and gift tax rates.
B. The tax may be imposed on gifts in trust to grandchildren.
C. The tax may be imposed on direct gifts to grandchildren.
D. All donors have a cumulative $1.5 million exemption against generation-skipping transfers.
A single man with substantial assets and income is supporting his 80-year-old partially senile mother with monthly cash gifts. He is trying to find a practical way to support his mother while at the same time saving federal gift and income taxes without giving up ultimate control of any assets. Which of the following courses of action will best accomplish these objectives?
A. Make her an interest free loan with a principal amount large enough to produce sufficient income for her support when invested in corporate bonds
B. Purchase corporate bonds that pay interest in an amount sufficient for her to support herself and assign the interest payments to her
C. Make her annual gifts of enough interest income from the tax free municipal bonds in his portfolio so that she will be able to support herself
D. Make her a gift of enough corporate bonds from his portfolio so that she will be able to support herself from the interest payments
For estate tax purposes which of the following is (are) a form of charitable gifts that may qualify for the charitable deduction?
-Split gifts
-
Charitable remainder trusts
A.
Neither 1 nor 2
B.
1 only
C.
2 only
D.
Both 1 and 2
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