American College HS-330 Online Practice Questions and Exam Preparation

American College HS-330 Online Questions & Answers

• Question 21:

  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. 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.
  B. 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.
  C. 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.
  D. The interest rate on the deferred tax is determined by the prime rate in effect on the date of death.
  B. 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 22:

  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.
  D. The transfer of property to a revocable trust is typically motivated by nontax reasons.

• Question 23:

  Which of the following statements concerning wills is (are) correct?

  1.

  A will should be reviewed periodically to assure that the property owner's most recent intentions are honored at death.

  2.

  Once signed, a will's provisions may not be changed without the consent of all the beneficiaries under the will.

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

• Question 24:

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

  A. If the joint tenants are two brothers and each contributed one half the property's purchase price, only one half the property's value will be in the estate of the first brother to die if his executor proves that the other brother contributed half of the purchase price.
  B. If the joint tenants are husband and wife, because this is a qualified joint interest, one half the value of the property will be in the estate of the first spouse to die regardless of which spouse contributed to the purchase price.
  C. If the joint tenants are brother and sister, no portion of the value of the property will be in the sister's estate if she dies first provided her executor proves that the brother contributed all the funds.
  D. If three sisters inherited property as joint tenants with right of survivorship, the entire value of the property will be in the estate of the first sister to die.
  D. If three sisters inherited property as joint tenants with right of survivorship, the entire value of the property will be in the estate of the first sister to die.

• Question 25:

  Which of the following statements concerning estates and trusts is (are) correct?

  -Both estates and trusts come into being by operation of law.

  -

  The personal representative of an estate and the trustee have similar fiduciary responsibilities.

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

• Question 26:

  Which of the following statements concerning ownership of property under a tenancy by the entirety is correct?

  A. The property will be in the probate estate of the first joint tenant to die.
  B. One tenant can freely transfer his or her property interest to a third person.
  C. It is a form of property ownership that applies only to personal property.
  D. It is a form of property ownership available only to married persons.
  D. It is a form of property ownership available only to married persons.

• Question 27:

  A man established and funded an irrevocable trust and named a bank as trustee. All income from the trust is to be paid to his four grandchildren. Which of the following powers retained by the grantor of the trust will cause all or a portion of the trust assets to be includible in his gross estate for federal estate tax purposes?

  1.

  The power to add principal to the trust

  2.

  The power to vary the amounts of trust income paid to each grandchild

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

• Question 28:

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

  A. A grandmother purchased a U.S. savings bond that is registered as payable to her and her two grandchildren and the bond has not yet been surrendered for cash.
  B. A father made a deposit of $100,000 into a bank account titled jointly with his son, and the son has not yet made any withdrawals.
  C. A mother purchased listed common stocks titling them in joint names with her daughter and the stocks have not yet been sold.
  D. A man deeded real estate to his sister but did not record the deed nor did he deliver the deed to his sister.
  C. A mother purchased listed common stocks titling them in joint names with her daughter and the stocks have not yet been sold.

• Question 29:

  All the following statements concerning a federal estate tax deduction for a bequest or gift to a qualified charity are correct EXCEPT:

  A. The amount of a charitable deduction may not exceed 50 percent of a decedent's adjusted gross estate.
  B. An estate may deduct the value of the remainder interest in a charitable remainder trust.
  C. A life insurance policy that was assigned to a charity as a gift less than 3 years prior to the insured's death qualifies for a charitable deduction.
  D. The amount of a charitable deduction is reduced by any taxes and administrative expenses chargeable against the bequest.
  A. The amount of a charitable deduction may not exceed 50 percent of a decedent's adjusted gross estate.

• Question 30:

  All the following statements concerning lifetime gifts are correct EXCEPT:

  A. The amount of gift tax paid within 3 years of death is included in the gross estate.
  B. 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.
  C. 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.
  D. Gifts of life insurance within 3 years of death are included in the donor-insured's gross estate.
  B. 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.