American College HS-330 Online Practice Questions and Exam Preparation

American College HS-330 Online Questions & Answers

• Question 391:

  On January 1, 2004 a father gave his daughter a $150,000 straight (ordinary) life insurance policy on his life. Premiums are paid annually. The pertinent facts about the policy are:

  Date of issue: July 1, 1992

  Premium paid on July 1, 2003 $2,400

  Terminal reserve on July 1, 2003 15,000

  Terminal reserve on July 1, 2004 18,000

  What is the value of the policy for federal gift tax purposes?

  A. $16,200
  B. $150,000
  C. $17,700
  D. $17,400
  C. $17,700

• Question 392:

  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. Any accumulated income and all trust principal must be available for distribution to the son when he attains age 21.
  B. The father's annual gift tax exclusion must be reduced by any amount used to pay college tuition costs.
  C. The trust must be irrevocable.
  D. 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 father's annual gift tax exclusion must be reduced by any amount used to pay college tuition costs.

• Question 393:

  Which of the following statements concerning a simple trust is (are) correct?

  1.

  All income must be distributed as earned to the person or persons who are beneficiaries of the trust.

  2.

  Principal and income may be distributed to a qualified charity.

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

• Question 394:

  A widow made the following cash gifts during the current year:

  -Donee Amount of Gift

  -

  A qualified charity $40,000

  -

  A close friend 30,000

  -

  Her sister 5,000

  -

  Her daughter 15,000

  -

  Her brother 10,000

  A. $23,000
  B. $45,000
  C. $52,000
  D. $95,000
  A. $23,000

• Question 395:

  Which of the following terms applies to the blending together of separate and community properties of spouses in community-property states?

  A. Inception
  B. Transmutation
  C. Commingling
  D. Proration
  C. Commingling

• Question 396:

  Many trust instruments provide for the removal of the original trustee. Valid reasons for removing the original trustee include which of the following?

  1.

  A shift in trust situs is desirable because of changes in law.

  2.

  The beneficiary has moved his or her residence to a distant state.

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

• Question 397:

  The federal gift tax is

  A. levied directly on the gift
  B. a flat tax based on gifts made in any taxable year
  C. a tax on the right of the donee to receive the property
  D. a tax on the right of the donor to make the gift
  D. a tax on the right of the donor to make the gift

• Question 398:

  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 a gift of enough corporate bonds from his portfolio so that she will be able to support herself from the interest payments
  B. Make her an interest free loan with a principal amount large enough to produce sufficient income for her support when invested in corporate bonds
  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. 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

• Question 399:

  The owner of a successful business wishes to sell it to his employee-son so that he can retire. The business is worth substantially more than the owner's basis. The owner and the employee-son have agreed to an installment sale. Which of the following statements concerning this sale is (are) correct?

  1.

  The present value of any unpaid installments remaining at the owner's death is includible in his estate.

  2.

  Installment payments are received free of income tax until the seller recovers his basis.

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

• Question 400:

  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
  D. 1 only