American College HS-330 Online Practice Questions and Exam Preparation

American College HS-330 Online Questions & Answers

• Question 131:

  All the following statements concerning revocable trusts are correct EXCEPT:

  A. A transfer to a revocable trust changes the income tax picture of the grantor.
  B. A transfer to a revocable trust is treated as an incomplete gift for gift tax purposes.
  C. Property transferred to a revocable trust typically avoids being included in the probate estate of the grantor.
  D. Revocable trusts are created and operate before the death of the settlor.
  A. A transfer to a revocable trust changes the income tax picture of the grantor.

• Question 132:

  A married man died this year leaving a gross estate of $2,750,000. Some additional facts concerning his estate are:

  -Administration expenses and debts $ 150,000

  -Marital deduction 750,000

  -

  Applicable credit amount (2005) 555,800

  -

  Applicable exclusion amount (2005) 1,500,000

  -

  State death taxes payable 22,200

  A. $163,710
  C. $151.490
  D. $147,510
  D. $147,510

• Question 133:

  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
  A. Both 1 and 2

• Question 134:

  All the following statements concerning an entity-purchase buy-sell agreement for a partnership are correct EXCEPT:

  A. Both the partners and the partnership are parties to the agreement that provides for business continuation.
  B. The partnership makes payments to the decedent-partner's estate to liquidate the partnership interest held by the estate.
  C. The partnership, in effect, liquidates the interest held by the decedent-partner's estate.
  D. It is the surviving partners who purchase the decedent's business interest so that the partnership can afford to pay the decedent's estate.
  D. It is the surviving partners who purchase the decedent's business interest so that the partnership can afford to pay the decedent's estate.

• Question 135:

  All the following statements concerning antenuptial agreements are correct EXCEPT:

  A. They can often deal with a surviving spouse's right to an intestate share of a deceased spouse's estate.
  B. They are frequently used prior to second marriages.
  C. They can protect the interests of children of former marriages.
  D. Income tax problems are avoided when property is transferred subject to such an agreement.
  D. Income tax problems are avoided when property is transferred subject to such an agreement.

• Question 136:

  Among the assets in a decedent's gross estate is stock in a closely held corporation that was left to a nephew. The interest passing to the nephew is required to bear the burden of all estate taxes and expenses. The relevant facts concerning this estate are:

  -Adjusted gross estate $1,600,000

  -Fair market value of stock in the

  -closely held corporation 700,000

  -Funeral expenses 30,000

  -Executor's commission 50,000

  -

  Federal and state death tax 160,000

  A. $240,000
  C. $700,000
  D. $ 80,000
  A. $240,000

• Question 137:

  Which of the following is an example of a taxable gift for federal gift tax purposes?

  A. The parents of a married son permit their son and his family to use a summer cottage that rents for $3,000 per month on a rent-free basis.
  B. A father gives his 19-year-old daughter a note promising to give her his Rolls Royce when she reaches the age of 21.
  C. Instead of parents paying an outside executive $60,000, a son runs their business for 8 months without charging a fee.
  D. A father cancels a $50,000 note his daughter gave him when he made a loan to her 2 years ago.
  D. A father cancels a $50,000 note his daughter gave him when he made a loan to her 2 years ago.

• Question 138:

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

• Question 139:

  Which of the following is (are) a permissible deduction from a decedent's gross estate to determine the decedent's adjusted gross estate?

  1.

  Expenses incurred for the benefit of individual heirs.

  2.

  Expenses incurred in the collection of estate assets.

  A. Neither 1 nor 2
  B. 2 only
  C. 1 only
  D. Both 1 and 2
  B. 2 only

• Question 140:

  Which of the following statements concerning pooled-income funds is (are) correct?

  1.

  A pooled income fund is similar to a mutual fund maintained by a qualified charity.

  2.

  It is an irrevocable arrangement in which the remainder interest passes to charity.

  A. Neither 1 nor 2
  B. 1 only
  C. Both 1 and 2
  D. 2 only
  C. Both 1 and 2