Question 1

A special power of appointment exists if the holder can exercise the power in favor of himself or herself,his or her creditors,or the creditors of his or her estate.

Accepted Answer

The answer of A special power of appointment exists if...

Question 2

Explain how shares of stock traded on a stock exchange are valued.What is the blockage rule?

Accepted Answer

The answer of Explain how shares of stock traded on...

Question 3

Wally died on November 15.His gross estate includes 100 shares of ABC Corporation stock.On November 15,ABC's stock trades were at a high of $100,a low of $92,and a close of $94.What is the per-share value of the stock in Wally's estate?

Accepted Answer

The answer of Wally died on November 15.His gross estate...

Question 4

Identify which of the following statements is true.

Accepted Answer

A reversionary interest means that there is a chance that the property may pass back to the transferor. The other statements are false. Reversionary interests of less than 5% are not includible in the gross estate, and if a reversionary interest exceeds 5%, the full value of the interest is included in the estate, not just the date-of-death value of the gifted property less the value of intervening life estates.

Question 5

Ray died on March 4.His estate includes some stock and a parcel of land.The stock is still owned by the estate on September 4,but the land is sold on August 30.If Ray's executor elects the alternate valuation date,what values would be used for estate tax purposes for the stock and the land?

Accepted Answer

The answer of Ray died on March 4.His estate includes...

Question 6

On March 1,Sue transfers stock worth $20,000 to Frank.How long must Sue live to avoid inclusion of the $20,000 of stock in her gross estate?

Accepted Answer

For federal estate tax purposes, there is no specific minimum time period that Sue must live after transferring the stock to avoid its inclusion in her gross estate. The key factor is that Sue must be alive at the time of the transfer. Once the transfer is complete, and assuming it is a complete and irrevocable transfer, the stock is no longer part of Sue's estate, regardless of how soon she may pass away after the transfer.

Question 7

Identify which of the following statements is true.

Accepted Answer

This statement is true according to the provisions of IRC section 2036, which includes in the gross estate any property transferred by the decedent during the decedent's lifetime, if the decedent retained the right to vote any shares in a controlled corporation. Statements A and B are false because the gross-up rule applies to the estate tax, not the gift tax, and the inclusion of gift taxes in the gross estate is limited to gifts made within three years of death, not five.

Question 8

Identify which of the following statements is true.

Accepted Answer

The statement "If the alternative valuation date is elected,changes in value that occur solely because of 'mere lapse of time' usually are to be ignored." is true. A is false because the alternate valuation date can be used even if it decreases the value of the gross estate. C is false because the gross estate includes all assets owned by a decedent at the time of death, whether or not they pass through probate.

Question 9

Julian died on November 1 and owned 100 shares of a New York Stock Exchange stock.The stock traded at a high of 100 and a low of 98 on November 1.It opened at 98 and closed at 100.On Julian's estate tax return,what will the per-share and total value of the stock be?

Accepted Answer

The answer of Julian died on November 1 and owned...

Question 10

In 2012,Paul transfers $1,000,000 to a trust benefiting his three children.As trustee,he has the power to determine the amount of distributions each year.Paul dies in the current year when the trust has a value of $1,200,000.How much of the trust's value is included in Paul's estate?

Accepted Answer

The entire value of the trust ($1,200,000) is included in Paul's estate because he retained control over the trust distributions, which is considered a retained interest under estate tax rules.

Question 11

The gross-up rule requires

Accepted Answer

The gross-up rule requires that gift taxes on gifts made by the decedent or the decedent's spouse that are paid by the decedent or his estate during the three-year period ending with the decedent's date of death must be included in the decedent's gross estate. This is done to prevent taxpayers from avoiding estate taxes by gifting away assets and paying the gift tax but still retaining control over the assets until death.

Question 12

The alternate valuation date can be elected for estate tax purposes only if the election

Accepted Answer

The alternate valuation date can only be elected if it decreases the value of the gross estate and also decreases the estate tax liability after reduction for tax credits. Therefore, both options B and C are required for the election of the alternate valuation date.

Question 13

The probate estate includes property that passes by will or an intestacy statute and does not include property that passes due to a beneficiary designation.

Accepted Answer

This is true. Property that passes by beneficiary designation, such as life insurance policies and retirement accounts, does not go through probate and is not considered part of the probate estate.

Question 14

In 2000,Mike transfers $100,000 of leased land to a trust.The trust income is payable to Mike's son for 13 years,after which time the land is to revert to Mike.This year,Mike dies when the land is valued at $210,000.The applicable federal rate is 10%,and the reversionary actuarial factor is 0.30.How much of the trust value must be included in Mike's estate?

Accepted Answer

The answer of In 2000,Mike transfers $100,000 of leased land...

Question 15

Denise died April 1 and owned several bonds that paid interest March 31 and September 30.Also,she owned stock that paid dividends quarterly on March 31,June 30,September 30,and December 31.Denise's estate received the interest and dividends on the payment dates.What should be included in Denise's gross estate?

Accepted Answer

Only interest and dividends received prior to the date of death should be included in Denise's gross estate. This is because the interest and dividends received after the date of death belong to the beneficiaries or heirs of the estate and not to Denise herself.

Question 16

Four years ago,Roper transferred to his son ownership of a $100,000 life insurance policy that Roper purchased on his own life in 2000.The cash value of the policy on the transfer date was $25,000.Roper died on March 1st of this year.The amount included in Roper's gross estate due to the life insurance policy is

Accepted Answer

Since Roper transferred ownership of the life insurance policy more than three years before his death, the proceeds of the policy are not included in his gross estate.

Question 17

On March 1,Bart transfers ownership of a $700,000 life insurance policy on his life that he purchased in 2011.How long must Bart live to avoid inclusion of the $700,000 death benefit in his estate?

Accepted Answer

According to the IRS, if an individual transfers ownership of a life insurance policy within three years of their death, the death benefit is included in the individual's estate for estate tax purposes. Therefore, Bart must live for at least three years after transferring ownership of the policy to avoid inclusion of the death benefit in his estate.

Question 18

In February of the current year,Tom dies.Two years and nine months before the date of death,Tom made a gift of stock valued at $2 million.Gift taxes paid on the transfer by Tom were $435,000 after reduction for a $345,800 unified credit ($780,800 - $345,800).At the time of his death,the gifted stock was valued at $2.3 million.The amount included in Tom's gross estate from this transfer is

Accepted Answer

The answer of In February of the current year,Tom dies.Two...

Question 19

Identify which of the following statements is true.

Accepted Answer

The answer of Identify which of the following statements is...

Question 20

Taxpayers can avoid the estate tax by making gifts at least a year prior to death.

Accepted Answer

The estate tax cannot be entirely avoided simply by making gifts a year prior to death because the IRS includes gifts made within three years of death back into the estate for tax purposes, and there are annual and lifetime gift tax exemption limits to consider.

Quiz 13: The Estate Tax

A special power of appointment exists if the holder can exercise the power in favor of himself or herself,his or her creditors,or the creditors of his or her estate.

Explain how shares of stock traded on a stock exchange are valued.What is the blockage rule?

Wally died on November 15.His gross estate includes 100 shares of ABC Corporation stock.On November 15,ABC's stock trades were at a high of $100,a low of $92,and a close of $94.What is the per-share value of the stock in Wally's estate?

Identify which of the following statements is true.

Ray died on March 4.His estate includes some stock and a parcel of land.The stock is still owned by the estate on September 4,but the land is sold on August 30.If Ray's executor elects the alternate valuation date,what values would be used for estate tax purposes for the stock and the land?

On March 1,Sue transfers stock worth $20,000 to Frank.How long must Sue live to avoid inclusion of the $20,000 of stock in her gross estate?

Identify which of the following statements is true.

Identify which of the following statements is true.

Julian died on November 1 and owned 100 shares of a New York Stock Exchange stock.The stock traded at a high of 100 and a low of 98 on November 1.It opened at 98 and closed at 100.On Julian's estate tax return,what will the per-share and total value of the stock be?

In 2012,Paul transfers $1,000,000 to a trust benefiting his three children.As trustee,he has the power to determine the amount of distributions each year.Paul dies in the current year when the trust has a value of $1,200,000.How much of the trust's value is included in Paul's estate?

The gross-up rule requires

The alternate valuation date can be elected for estate tax purposes only if the election

The probate estate includes property that passes by will or an intestacy statute and does not include property that passes due to a beneficiary designation.

On March 1,Bart transfers ownership of a $700,000 life insurance policy on his life that he purchased in 2011.How long must Bart live to avoid inclusion of the $700,000 death benefit in his estate?

Identify which of the following statements is true.

Taxpayers can avoid the estate tax by making gifts at least a year prior to death.