Question 1

The payment date for estate taxes may be extended by the IRS for all of the following reasons except

Accepted Answer

All of the reasons listed are valid for an extension of the payment date for estate taxes.

Question 2

Compare the credits available for estate tax purposes with the credits available for gift tax purposes. What differences exist?

Accepted Answer

The answer of Compare the credits available for estate tax...

Question 3

Lou dies on April 12, 2018. All of Lou's property passed to Paula, his daughter. Paula dies on January 15, 2020. Both Lou's and Paula's estates pay federal estate taxes. Lou's estate tax was $350,000. How much can Paula's estate claim for a credit for tax on prior transfers?

Accepted Answer

Paula's estate can claim a credit for the full amount of federal estate tax paid by Lou's estate, which is $350,000, as it is a tax on prior transfers within two years.

Question 4

Yee made $3 million of taxable gifts in 1993 and paid gift taxes (less the unified credit)of $1,098,000. Yee died with a taxable estate of $10,000,000. At current rates, the gift taxes payable on $3 million would be $1,145,800. Yee died in a year when the unified credit was $2,045,800. Determine her estate tax liability.

Accepted Answer

The answer of Yee made $3 million of taxable gifts...

Question 5

An executor may elect to postpone payment of the estate tax attributable to a remainder or reversionary interest until 6 months after the interests of the other person(s)terminate.

Accepted Answer

This statement is true according to IRS regulations under section 6166 of the tax code. An executor can request to postpone payment of estate taxes for a remainder or reversionary interest until 6 months after the other person's interests in the property have ended. This option is available for estates that consist largely of a closely-held business or farm.

Question 6

A stock redemption to pay death taxes under Sec. 303 is generally treated as

Accepted Answer

A Sec. 303 redemption is treated as a sale or exchange of property for tax purposes. This means that the shareholder may recognize capital gains or losses on the redemption, depending on the price paid by the corporation for the stock. The purpose of the Sec. 303 redemption is to enable the decedent's estate to pay estate taxes using corporate funds, without forcing the shareholders to recognize substantial taxable gains.

Question 7

Identify which of the following statements is true.

Accepted Answer

Special use valuation is a real estate tax benefit that allows eligible farmland to be valued at its current use, rather than its highest possible use. This helps reduce the estate tax value of the property, which can alleviate liquidity problems for the heirs who inherit the farmland. The other statements are false. The transferor, not the transferee, is liable for the GSTT in the case of a direct skip. Qualified disclaimers can be an effective estate planning tool, allowing a person to disclaim an inheritance in order to redirect it to another beneficiary, but they are not the only available option.

Question 8

The GSTT's (generation-skipping transfer tax)purpose is

Accepted Answer

The GSTT is a type of transfer tax imposed on transfers to grandchildren or other individuals who are two or more generations younger than the transferor. It is designed to prevent individuals from transferring wealth to future generations without paying transfer taxes. Therefore, the purpose of the GSTT is to impose some form of transfer tax one time a generation.

Question 9

Joe dies late in 2018 and his estate is subject to an estate tax of $2 million. He leaves all of his assets to his daughter, Claudia. Claudia dies in early 2020. Which of the following statements is correct?

Accepted Answer

Claudia's estate can claim a credit for the estate tax paid by Joe's estate under the Internal Revenue Code's provisions for a credit for tax on prior transfers, which allows a credit for estate tax paid on property transferred to the decedent within a certain period.

Question 10

Identify which of the following statements is true.

Accepted Answer

The period for payment of estate taxes may be extended if the executor shows "reasonable cause" for not being able to pay some, or all, of the estate tax liability on the regular due date.

Question 11

Guy died this year. His estate includes a closely held business interest valued at $400,000 and other property valued at $675,000. Guy's allowable Sec. 2053 and 2054 deductions total $75,000. Within three years of death, partly in hopes of qualifying his estate for the installment payment allowed under Sec. 6166 treatment, Guy made gifts of listed securities of $350,000 (at 2002 valuations)and paid no gift tax on the gift. Is Guy's estate eligible for Sec. 6166 treatment?

Accepted Answer

The answer of Guy died this year. His estate includes...

Question 12

On December 1, 1976, Bart made a gift and claimed a $30,000 specific exemption. When Bart died in 2017, his tax base was $2,000,000. Assuming the maximum unified credit is $780,800, what is the credit available when computing Bart's estate tax?

Accepted Answer

The answer of On December 1, 1976, Bart made a...

Question 13

The maximum amount of the stock redemption proceeds under Sec. 303 is determined by summing all of the following except

Accepted Answer

All the options listed (the estate's death taxes, funeral expenses, and administrative expenses) are considered in determining the maximum amount of stock redemption proceeds under Section 303. This section allows a portion of the stock in a closely held business to be redeemed by the estate without the redemption being treated as a dividend, to the extent of paying death taxes, funeral expenses, and administrative expenses.

Question 14

Identify which of the following statements is false.

Accepted Answer

The GSTT is levied at a flat rate of 35%, which is the same as the top rate under the estate tax rate schedule.

Question 15

One of the major problems facing executors in managing the estate is

Accepted Answer

Liquidity can be a major problem for executors as they may need to sell assets quickly in order to pay off debts or distribute inheritances. This can be especially challenging if the majority of the assets are illiquid, such as real estate or businesses. Identifying deductions, computing the unified credit, and valuing assets can also be challenging tasks for executors, but liquidity is often the most pressing issue.

Question 16

Sasha gives $1,000,000 to her granddaughter. Sasha has used all of her unified credit and is in the 40% marginal gift tax bracket; ignore the annual exclusion and exemption. What is the amount of her tax on this transfer?

Accepted Answer

Since Sasha has used all of her unified credit and is in the 40% marginal gift tax bracket, the tax on the $1,000,000 gift would be 40% of $1,000,000, which equals $400,000.

Question 17

Compare the tax treatment of administration expenses with that of the decedent's debts.

Accepted Answer

The answer of Compare the tax treatment of administration expenses...

Question 18

Identify which of the following statements is true.

Accepted Answer

An executor may elect to postpone payment of the estate tax attributable to a remainder or reversionary interest until six months after the interests of the other person(s) terminate.

Question 19

Identify which of the following statements is false.

Accepted Answer

The transferor is liable for the generation-skipping transfer tax (GSTT) in the case of a direct skip.

Question 20

A qualified disclaimer is a valuable estate planning tool because

Accepted Answer

A qualified disclaimer allows the person to refuse an inheritance or gift such that it passes directly to the next designated beneficiary without being treated as a gift made by the person who disclaims. This can have advantageous tax consequences and does not affect the person's lifetime gift and estate tax exemptions. The other options listed are not benefits of a qualified disclaimer.

Quiz 13: The Estate Tax

The payment date for estate taxes may be extended by the IRS for all of the following reasons except

Compare the credits available for estate tax purposes with the credits available for gift tax purposes. What differences exist?

Lou dies on April 12, 2018. All of Lou's property passed to Paula, his daughter. Paula dies on January 15, 2020. Both Lou's and Paula's estates pay federal estate taxes. Lou's estate tax was $350,000. How much can Paula's estate claim for a credit for tax on prior transfers?

An executor may elect to postpone payment of the estate tax attributable to a remainder or reversionary interest until 6 months after the interests of the other person(s)terminate.

A stock redemption to pay death taxes under Sec. 303 is generally treated as

Identify which of the following statements is true.

The GSTT's (generation-skipping transfer tax) purpose is

Joe dies late in 2018 and his estate is subject to an estate tax of $2 million. He leaves all of his assets to his daughter, Claudia. Claudia dies in early 2020. Which of the following statements is correct?

Identify which of the following statements is true.

On December 1, 1976, Bart made a gift and claimed a $30,000 specific exemption. When Bart died in 2017, his tax base was $2,000,000. Assuming the maximum unified credit is $780,800, what is the credit available when computing Bart's estate tax?

The maximum amount of the stock redemption proceeds under Sec. 303 is determined by summing all of the following except

Identify which of the following statements is false.

One of the major problems facing executors in managing the estate is

Sasha gives $1,000,000 to her granddaughter. Sasha has used all of her unified credit and is in the 40% marginal gift tax bracket; ignore the annual exclusion and exemption. What is the amount of her tax on this transfer?

Compare the tax treatment of administration expenses with that of the decedent's debts.

Identify which of the following statements is true.

Identify which of the following statements is false.

A qualified disclaimer is a valuable estate planning tool because