American College American College Certifications HS-330 Questions & Answers

• Question 371:

  Examples of terminable interests that are nondeductible for the federal estate tax marital deduction include which of the following?

  -

  A property interest that would pass to someone else if the surviving spouse remarries

  -

  A life estate in property that would pass to another person at the death of the surviving spouse

  A.

  Both 1 and 2

  B.

  1 only

  C.

  Neither 1 nor 2

  D.

  2 only

  Correct Answer: A

• Question 372:

  Which of the following statements concerning marital transfers to a non-U.S. citizen spouse is (are) correct?

  -

  A marital deduction is automatically available as long as property is transferred outright to the non-citizen spouse.

  -

  A marital deduction is automatically available if the transferor-decedent spouse is a U. S. citizen.

  A.

  2 only

  B.

  Both 1 and 2

  C.

  Neither 1 nor2

  D.

  1 only

  Correct Answer: C

• Question 373:

  Alan, a widower, is a retired executive with substantial assets. He wishes to provide for the financial security of his two grandchildren since their father, Alan's son, has always managed money poorly. This year Alan would like each grandchild to receive a substantial gift. Which of the following statements concerning the generation-skipping transfer tax (GSTT) on these gifts is (are) correct?

  -Federal estate or gift tax will not be imposed if the gift is otherwise subject to the GSTT.

  -

  Assuming no prior gifts, Alan can gift a cumulative total of (not including the annual exclusion) $1.5 million to his grandchildren without the imposition of the GSTT.

  A.

  2 only

  B.

  Neither 1 nor 2

  C.

  Both 1 and 2

  D.

  1 only

  Correct Answer: A

• Question 374:

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

  -

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

  -

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

  A.

  Both 1 and 2

  B.

  1 only

  C.

  2 only

  D.

  Neither 1 nor 2

  Correct Answer: A

• Question 375:

  Which of the following statements concerning ownership of property in the form of a joint tenancy with right of survivorship is correct?

  A. This form of ownership is limited to real property.

  B. Nonqualified joint tenants may have unequal interests in the property.

  C. Upon the death of a joint tenant, the surviving joint tenant receives the decedent's interest by operation of law.

  D. Qualified joint tenancies cannot be severed without mutual consent.

  Correct Answer: C

• Question 376:

  Ignoring the annual per-donee exclusion, which of the following transfers is a gift for federal gift tax purposes?

  A. A creditor cancels the promissory note of a recently unemployed friend as a charitable gesture.

  B. A father promises to buy his daughter a condominium when she finishes college.

  C. A grandmother pays her grandson's $30,000 tuition at an Ivy League university.

  D. An individual gratuitously performs valuable services for the benefit of a close friend.

  Correct Answer: A

• Question 377:

  Which of the following statements concerning a testamentary trust is correct?

  A. It becomes effective only at the death of the grantor.

  B. It saves federal and state death taxes at the death of the grantor.

  C. The trust terms must be included in the will.

  D. The assets in the trust are free of probate costs.

  Correct Answer: A

• Question 378:

  Which of the following statements concerning the inclusion and valuation of all or part of a commercial annuity in the estate of an annuitant is (are) correct?

  -A life annuity with a period certain is includible to the extent of the present value of any remaining guaranteed payments.

  -

  If the executor elects the alternate valuation date, an annuity is includible at its replacement cost 6 months after death.

  A.

  Neither 1 nor 2

  B.

  Both 1 and 2

  C.

  2 only

  D.

  1 only

  Correct Answer: D

• Question 379:

  Generally all the following statements concerning life insurance arrangements for partnership buy- sell agreements are correct EXCEPT:

  A. With an entity-purchase agreement the formula used for determining the number of life insurance policies needed is N (number of partners) + 1.

  B. With an entity-purchase agreement the partnership strives to maintain face amounts of coverage equal to its obligations under the agreement.

  C. With a cross-purchase agreement each partner purchases life insurance on the life of each of the other partners.

  D. With a cross-purchase agreement the individual partners are the applicants, owners, beneficiaries and premium-payers of the policies.

  Correct Answer: A

• Question 380:

  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?

  -

  The trust income is to be paid to the son or accumulated at the discretion of the trustee.

  -

  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.

  1 only

  B.

  Neither 1 nor 2

  C.

  Both 1 and 2

  D.

  2 only

  Correct Answer: C