HS-330 Online Practice Questions and Answers

All the following statements concerning the generation-skipping transfer tax (GSTT) are correct EXCEPT:

A. The tax is imposed according to a graduated rate schedule similar to the federal estate and gift tax rates.

B. The tax may be imposed on gifts in trust to grandchildren.

C. The tax may be imposed on direct gifts to grandchildren.

D. All donors have a cumulative $1.5 million exemption against generation-skipping transfers.

A wife makes outright gifts of $66,000 this year to her son, and her husband agrees to split the gifts with her. Which of the following correctly states the amount of the taxable gifts?

A. Wife $22,000, husband $22,000

B. Wife $44,000, husband 0

C. Wife $12,000, husband $32,000

D. Wife $32,000, husband $32,000

All the following statements concerning an estate for a term of years are correct EXCEPT:

A. The tenant has the right to possess the property during the term of his interest.

B. An interest may extend beyond the lifetime of the grantor.

C. The tenant may transfer the property at the end of the term of his interest.

D. It is an interest in property established for a specific duration.

Believing that his death was imminent, a widower gave his son some real estate two years ago and filed a timely gift tax return. The widower died on January 1st of this year. The additional facts are:

-Widower's basis in the real estate $400,000

-

Value of the real estate when gifted 1,000,000

-

Value of the real estate on date of death 2,000,000

-

Amount of gift tax paid by widower 345,800

A.

The son's income tax basis in the real estate is $2,000,000.

B.

The widower recognized no gain for income tax purposes at the time the gift was made.

C.

The gift of the real estate is included in the calculation of the widower's federal estate tax as an adjusted taxable gift.

D.

The gift tax paid is brought back into the widower's gross estate at $345,800.

Which of the following statements concerning pooled-income funds is (are) correct?

1.

The fund contains commingled donations from many sources.

2.

A decedent donation purchases units in the fund which generate income that is paid at least annually to a charity.

A. 2 only

B. Neither 1 nor 2

C. Both 1 and 2

D. 1 only

Which of the following types of real property ownership will be deemed to be a tenancy in common?

A. Two brothers own equal amounts of all the common stock in a corporation, the only asset of which is real property.

B. Two brothers own equal undivided interests in a piece of real property, with each brother being able to divest himself of his interest by sale, gift, or will.

C. Two brothers own equal fractional interests in a piece of real property and at the death of one of the brothers the survivor will own the entire piece of property.

D. Two brothers are equal partners in a general partnership that owns a piece of real property used in the partnership business.

A man is planning to establish and fund a 20-year irrevocable trust for the benefit of his two sons, aged 19 and 22, and plans to give the trustee power to sprinkle trust income. From the standpoint of providing federal income, gift, and estate tax savings, which of the following would be the best choice of trustee?

A. A bank or trust company

B. The grantor's 70-year-old father

C. The grantor of the trust

D. The grantor's 22-year-old son

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. 1 only

B. Both 1 and 2

C. Neither 1 nor 2

D. 2 only

A wealthy individual might consider selling a substantially appreciated property interest in an installment sale for which of the following reasons?

1.

To spread the taxable gain inherent in the property over the period of the installments

2.

To provide a buyer who lacks the requisite funds for a lump-sum purchase with the ability to finance the acquisition

A. 2 only

B. Both 1 and 2

C. Neither 1 nor 2

D. 1 only

Which of the following statements concerning the imposition of state death taxes on property owned by a decedent is (are) correct?

1.

Real estate must be taxed in the state where the decedent was domiciled.

2.

Intangible personal property is generally taxed in the state where the decedent was domiciled.

A. 2 only

B. Both 1 and 2

C. 1 only

D. Neither 1 nor 2