Question 1

As a result of an unqualified refusal by a potential beneficiary to accept a transfer of property,the property passes to:&#10;A)The beneficiary.&#10;B)The contingent beneficiary.&#10;C)The disclaimant.&#10;D)The disclaimant beneficiary.

Accepted Answer

When a potential beneficiary refuses to accept a transfer of property, it is considered a disclaimer. The property then passes to the next designated beneficiary, which in this case would be the contingent beneficiary. Therefore, the answer is B.

Question 2

If a surviving spouse remarries,and is the survivor of that subsequent marriage,a ____ trust can preserve the original exemption amount.&#10;A)By-pass trust.&#10;B)Credit Shelter trust.&#10;C)Exemption trust.&#10;D)Qualified Domestic trust.

Accepted Answer

A Credit Shelter Trust, also known as a Bypass Trust, is designed to help preserve the estate tax exemption of the first spouse to die, allowing the surviving spouse to benefit from the trust assets during their lifetime, while preserving the exemption amount for the beneficiaries upon the surviving spouse's death.

Question 3

An estate under Section 6166 allows for the estate tax attributable to the closely held business to be paid in ___ equal installments beginning four years after the decedent's death.&#10;A)Six.&#10;B)Nine.&#10;C)Ten.&#10;D)Fourteen.

Accepted Answer

Section 6166 allows for the estate tax attributable to the closely held business to be paid in ten equal installments beginning four years after the decedent's death.

Question 4

Which of the following is not a feature of a QTIP?&#10;A)Bi-annual payments to the spouse.&#10;B)Exclusive payments for the surviving spouse.&#10;C)Lifetime income interest in the trust for the surviving spouse.&#10;D)Mandatory payments to the surviving spouse.

Accepted Answer

QTIP trusts do not have a requirement for bi-annual payments to the surviving spouse. Instead, the surviving spouse is given exclusive payments and a lifetime income interest in the trust. While payments may need to be made to fulfill the income interest, they are not mandatory.

Question 5

Who of the following is not a related party for Installment Sale rules?&#10;A)Brother.&#10;B)Children.&#10;C)Sister.&#10;D)Uncle.

Accepted Answer

The IRS considers siblings, parents, children, and grandparents related parties for installment sale rules, but not uncles.

Question 6

Which of the following trusts allows a non-U.S.citizen spouse to benefit from the marital deduction normally allowed to U.S.spouses.&#10;A)GRAT.&#10;B)QDOT.&#10;C)QPRT.&#10;D)QTIP.

Accepted Answer

A QDOT (Qualified Domestic Trust) allows a non-U.S. citizen spouse to receive the marital deduction for estate and gift tax purposes. Without a QDOT, the marital deduction would not be available since the spouse is not a U.S. citizen. The other trusts listed are not relevant to this specific issue.

Question 7

Which of the following is not a type of buy-sell agreement?&#10;A)Cross-purchase Agreement.&#10;B)Entity Purchase Agreement.&#10;C)Member Purchase Agreement is a distractor.&#10;D)Wait and See Agreement.

Accepted Answer

Cross-purchase agreements, entity purchase agreements, and wait and see agreements are all common types of buy-sell agreements. Member Purchase Agreement is not a common type of buy-sell agreement.

Question 8

Which of the following is a special use valuation that can be elected by farms and closely-held businesses?&#10;A)Section 303.&#10;B)Section 1211(a).&#10;C)Section 2032(a).&#10;D)Section 6166.

Accepted Answer

Section 2032(a) allows farms and closely-held businesses to elect a special use valuation for estate tax purposes. This special valuation is based on the value of the property for its current use, rather than its fair market value, which can help reduce the estate tax liability. Section 303 deals with redemptions of stock with a value exceeding 35% of the decedent's adjusted gross estate. Section 1211(a) pertains to the treatment of losses on the sale or exchange of property. Section 6166 allows for the deferral of estate tax payments for certain closely-held businesses.

Deck 16: Applications in Estate Planning