Deck 13: Estate Taxes

Question 1

Only income that was received up to the date of death is included in the decedent's final income tax return.

Answer 1

True

Question 2

In computing taxable income, an estate is allowed an exemption of

A) $100.
B) $600.
C) $1,000.
D) $6,000.

Answer 2

B

Question 3

The first step in the taxation procedure is to notify the Internal Revenue Service (IRS) that the taxpayer has died and that a fiduciary relationship now exists.

Answer 3

True

Question 4

The net estate tax is the amount of tax that must be paid to the government.

Question 5

Medical expenses paid before death by the decedent are deductible on the final income tax return if the deductions are itemized.

Question 6

The Tax Relief Act provides tax exemptions and rates through 2012.

Question 7

Usually, the donee must pay the gift tax; however, if he does not do so, the donor may have to pay the tax.

Question 8

Paralegals are not allowed to assist in preparation of estate tax returns.

Question 9

A generation-skipping transfer tax is a tax imposed when property exceeding $1 million is transferred to a person who is one generation below the donor or decedent.

Question 10

The amounts reported to the IRS on Form 1099 by payers are always the amounts that should be reported on the decedent's final tax return.

Question 11

Income in respect of the decedent must be included in the gross income of the decedent's estate if

A) a joint owner receives it.
B) a beneficiary receives it.
C) the estate receives it.
D) All of the answers are correct.

Question 12

On an estate tax return, the personal representative may elect to use the alternate-valuation method, which allows property to be valued as of six months after the date of death.

Question 13

An employer identification number (EIN), assigned by the Internal Revenue Service (IRS), is required to file estate tax returns.

Question 14

The personal representative does not need to file the final income tax return of the decedent for the year of death.

Question 15

An estate's income is reported on IRS Form

A) 706.
B) 1040.
C) 1041.
D) 1099.

Question 16

An estate's annual income must be reported to the IRS if it amounts to

A) $100 or more.
B) $600 or more.
C) $1,000 or more.
D) $6,000 or more.

Question 17

Only income that was received up to the date of death is included in the decedent's final income tax return.

Question 18

Expenses of administering an estate can be deducted either from the gross estate in figuring the federal estate tax or from the estate's gross income in figuring the estate's income tax.

Question 19

In 2012, a federal estate tax return must be filed if the gross estate is more than

A) $1,500,000.
B) $2,000,000.
C) $3,000,000.
D) $5,000,000.

Question 20

On the estate tax return, one-half of the property passing to a surviving spouse qualifies for the marital deduction.

Question 21

The top federal estate tax rate in 2012 is

A) 15 percent.
B) 25 percent.
C) 35 percent.
D) 45 percent.

Question 22

In determining the decedent's gross estate, real estate owned solely by the decedent is reported on the following schedule:

A) Schedule K.
B) Schedule A.
C) Schedule B.
D) Schedule C.

Question 23

Incidents of ownership relative to life insurance do NOT include the power to

A) change the beneficiary.
B) surrender or cancel the policy.
C) assign the policy.
D) obtain the cash value.

Question 24

Generally, the value of the decedent's property interest for estate tax purposes is its

A) gross estate value at the date of death.
B) value on the alternate valuation date.
C) fair market value at the date of death.
D) its value six months after the date of death.

Question 25

The taxable estate is the

A) total value of a decedent's property at death.
B) property of a decedent that will be taxed after subtracting for allowable expenses, deductions, and exclusions.
C) price to which a willing seller and a willing buyer would agree for an item in the ordinary course of trade.
D) value of a decedent's property six months after death.

Question 26

A federal estate tax return is filed on IRS Form

A) 706.
B) 1040.
C) 1041.
D) 1099.

Question 27

The person receiving the property in a generation-skipping transfer is called

A) a grandchild.
B) a generation person.
C) a skip person.
D) None of the answers is correct.

Question 28

For estate tax purposes, the gross estate includes

A) individually owned property.
B) jointly owned property.
C) life insurance.
D) All of the answers are correct.

Question 29

Gifts to someone other than one's spouse must be reported annually to the IRS when they exceed

A) $10,000 per donee per year.
B) $11,000 per donee per year.
C) $13,000 per donee per year.
D) $120,000 per donee per year.

Question 30

To determine the net federal estate tax, certain credits are deducted from the gross tax, including

A) state death taxes.
B) an applicable credit amount.
C) gift taxes paid on gifts made before 1976.
D) All of the answers are correct.