American College American College Certifications HS330 Questions & Answers

• Question 271:

  All the following statements concerning real property ownership by married couples as joint tenants with right of survivorship are correct EXCEPT:

  A. The deceased spouse's interest in the property qualifies for the marital deduction since it passes outright to the surviving spouse.

  B. In common-law states the total value of the property receives a stepped-up tax basis in the estate of the first spouse to die.

  C. Jointly held property between spouses does not pass through the probate estate of the first spouse to die.

  D. All benefits of ownership remain available to the surviving spouse without interruption during the administration of the deceased spouse's estate.

  Correct Answer: B

• Question 272:

  All the following statements concerning an estate for a term of years are correct EXCEPT:

  A. The tenant has the right to possess the property during the term of his interest.

  B. An interest may extend beyond the lifetime of the grantor.

  C. The tenant may transfer the property at the end of the term of his interest.

  D. It is an interest in property established for a specific duration.

  Correct Answer: C

• Question 273:

  All the following statements concerning lifetime gifts are correct EXCEPT:

  A. 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.

  B. The amount of gift tax paid within 3 years of death is included in the gross estate.

  C. 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.

  D. Gifts of life insurance within 3 years of death are included in the donor-insured's gross estate.

  Correct Answer: C

• Question 274:

  Which of the following acts by a person other than a lawyer is clearly an unauthorized practice of law?

  A. A sister drafts a will for her brother using printed forms.

  B. A CLU explains to a client how a life insurance policy may solve estate liquidity needs.

  C. A CPA designs an estate plan for presentation to a client.

  D. A trust officer gives a client advice about the taxation of a trust.

  Correct Answer: A

• Question 275:

  A father and son have been farming land owned by the father for the past 12 years. Just prior to his death, the father was offered $900,000 for his farm because of its possible use as a shopping center. The son would like to continue to farm the land if it can be included in his father's estate at its current use value. Additional facts are:

  1.Average annual gross rentals from nearby farms of similar acreage are $36,000.

  2.Average annual state and local real estate taxes on the farm are $4,000.

  3.The interest rate for loans from the Federal Land Bank is 8 percent.

  For federal estate tax purposes, the farm method valuation formula would result in a current use value for the farm of

  A. $600,000

  B. $300,000

  C. $500,000

  D. $400,000

  Correct Answer: D

• Question 276:

  A father wants to accumulate funds for his 12-year-old son's college education. On the advice of his attorney, the father establishes an IRC Section 2503(c) trust and funds it with annual gifts. All the following statements concerning this arrangement are correct EXCEPT:

  A. In the event of the son's death prior to age 21, trust assets must either be payable to the son's estate or be subject to a general power of appointment held by the son.

  B. The trust must be irrevocable.

  C. Any accumulated income and all trust principal must be available for distribution to the son when he attains age 21.

  D. The father's annual gift tax exclusion must be reduced by any amount used to pay college tuition costs.

  Correct Answer: D

• Question 277:

  An executor elects to value the assets of the estate at the alternative valuation date 6 months after death. Which of the following statements concerning the estate tax value of assets included in this estate is correct?

  A. Property distributed under the will before the alternate valuation date is valued at the date of death.

  B. Property that has increased in value since the date of death may be valued at the date of death if the executor so elects.

  C. An annuity included in the gross estate that diminishes with the mere passage of time is includible at the date of death value.

  D. Property sold before the alternate valuation date is valued at the alternate valuation date.

  Correct Answer: C

• Question 278:

  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. 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.

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

  C. 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.

  D. 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.

  Correct Answer: A

• Question 279:

  Requirements for property to qualify for the federal estate tax marital deduction include which of the following?

  1.

  The property interest must be includible in the decedent's gross estate.

  2.

  The property must pass in such manner that it will be includible in the surviving spouse's estate at death unless consumed or given away.

  A. Both 1 and 2

  B. 2 only

  C. 1 only

  D. Neither 1 nor 2

  Correct Answer: A

• Question 280:

  A wealthy individual might consider selling a substantially appreciated property interest in an installment sale for which of the following reasons?

  1.

  To spread the taxable gain inherent in the property over the period of the installments

  2.

  To provide a buyer who lacks the requisite funds for a lump-sum purchase with the ability to finance the acquisition

  A. 1 only

  B. Neither 1 nor 2

  C. 2 only

  D. Both 1 and 2

  Correct Answer: D