Question;2343. Question MC #1;Which, if any, of the following statements reflects the correct tax valuation rules?;a.;The geographical location of the property is relevant.;b. The value of a note receivable is its;face amount.;c. Sentimental value should be;considered.;d. Values listed in the classified;section of the newspaper are not representative.;e. None of the above.;2344. Question MC #2;At the time of her death in 2011, Corinne owned stock in Gray Corporation. The;stock is traded on a local exchange with the most recent selling prices as;follows.;Per;Share Price;Four trading days prior to Corinne?s death;$100;Six trading days after Corinne?s death;120;Presuming no alternate valuation date election, Corinne?s gross estate should;include a per share value of;a.;$120.;b. $112.;c. $110.;d. $108.;e. None of the above.;2345. Question MC #3;Which, if any, of the following factors should reduce the value of a note receivable included in the gross estate;of the holder?;a.;The interest rate provided for is 9%.;b. The note is not supported by;collateral.;c. The note is payable on demand.;d. The note is forgiven by the;decedent?s will.;e. None of the above.;2346. Question MC #4;Which of the following independent statements correctly reflects the valuation;rules applicable to estate and gift taxes?;a.;In valuing an annuity issued by Prudential Insurance Company, use the tables;issued by the IRS.;b. In valuing an unmatured life;insurance policy on which no further premiums need be paid, use the policy?s;interpolated terminal reserve amount.;c. In valuing a note receivable, the;issuer?s bankruptcy should be taken into account.;d. In valuing a used car, use the;trade-in value offered by a dealership as a down payment on a new model.;e. None of the above statements is;correct.;2347. Question MC #5;Which, if any, are characteristics of the valuation tables issued by the IRS?;a.;The IRS must issue new updated tables once a year.;b. To determine the factor for a;remainder interest, subtract the life estate factor provided in the table from;one.;c. The same table that provides the;factor for a life estate can be used to determine the value of an income;interest for a term certain.;d. To use the tables, the Federal;interest rate for the year of the transfer must be known.;e. None of the above.;2348. Question MC #6;Which statement is correct concerning the rules governing the application of;2032A (?special use? valuation)?;a.;The qualifying property subject to the election must include only real property.;b. The qualifying heir of the property;need not be a family member of the decedent.;c. The election is available to the;qualifying heir even if the decedent merely held the farm as an investment.;d. In the event of recapture, the;additional estate taxes are imposed on the qualifyng heir.;e. No correct answer is given above.;2349. Question MC #7;Which, if any, of the following statements correctly;reflects the operational rules under ? 2032A (?special use? valuation)?;a.;The ? 2032A election is available for gift tax situations.;b. The ? 2032A election permits the;valuation of qualifying property at its ?most suitable? use value.;c. In meeting the 50% test and 25% test;the qualifying property is considered at its ?best? use value.;d. If ? 2032A is elected, only a sale of;the qualifying property within the next 10 years will cause recapture.;e. None of the above.;2350. Question MC #8;In 2011, Donna?s father dies and leaves her the family farm. The farm has a;current use value of $4,000,000 and a best use value of $4,500,000. If the;2032A election is made, the farm should be included in the father?s gross;estate at a value of;a.;$1,000,000.;b. $2,980,000 ($4,000,000 ? $1,020,000).;c. $3,480,000 ($4,500,000 ? $1,020,000).;d. $4,000,000.;e. None of the above.;2351. Question MC #9;Which, if any, of the items listed below are valid factors utilized in valuing;the stock in a closely held corporation?;a.;The company?s dividend-paying capacity.;b. The nature of the business.;c. The history of the company since its;inception.;d. The book value of the stock.;e. All of the above.;2352. Question MC #10;At the time of his death, Harvey was a shareholder in Grebe Corporation. In;valuing the Grebe stock included in Harvey?s gross estate, the IRS contends;that the corporation possessed considerable goodwill. In disputing this;contention, which of the following point(s) is/are relevant?;a.;To provide financing, Grebe has been obtaining its working capital from the;shareholders at a below market rate of interest.;b. The rate of return used by the IRS;for the type of business involved is too high.;c. Average net profit figures do not;include large losses from unrelated investments.;d. Harvey was not an employee of Grebe;but was merely a passive investor.;e. None of the above.;2353. Question MC #11;At the time of Rick?s death, he owned 70% of the stock in Robin Corporation, a;closely held family business. Over the past five years, Robin has averaged;annual profits of $400,000 in an industry where the usual rate of return is 9%.;If the book value of the corporation?s assets is $1,000,000 and goodwill;exists, what might be a realistic value of the stock in Rick?s gross estate?;a.;$2,550,000.;b. $1,785,000.;c. $1,550,000.;d. $310,000.;e. None of the above.;2354. Question MC #12;With respect to a stock interest in a closely held corporation, which, if any;of the following factors work to increase;the gross estate value of the interest?;a.;The stock is not marketable.;b. A majority interest is involved.;c. The profits of the business are less;than the industry average.;d. The blockage rule applies.;e. None of the above.;2355. Question MC #13;Which, if any, of the following statements properly characterize features;involving buy-sell agreements?;a.;If properly structured, the agreements can control valuation for estate tax;purposes.;b. If a stock redemption is proposed;utilize a cross-purchase type.;c. Agreements cannot be used to control;disposition of partnership interests.;d. Arrangements work best when the;interest to be transferred involves publicly traded securities.;e. None of the above.;2356. Question MC #14;In a typical ?estate freeze? involving stock;a.;The owner makes a gift of both common and preferred stock.;b. The preferred stock is subject to the;gift tax but not to the estate tax.;c. The common stock is subject to the;gift tax but not to the estate tax.;d. The common stock is subject to both;the gift tax and the estate tax.;e. None of the above.;2357. Question MC #15;Dustin owns all of the stock of Gold Corporation which includes both common and;preferred shares. The preferred stock is noncumulative, has no redemption date;and possesses no liquidation preference. In 1995, Dustin makes a gift to his;adult children of all of the common stock. He dies in 2011 still owning the preferred;stock. The value of the Gold stock on the relevant dates is;1995;2011;Preferred;$ 400,000;$ 500,000;Common;3,000,000;5,000,000;One of the tax consequences of this estate freeze is;a.;Dustin?s gross estate includes $0 as to the stock.;b. Dustin?s gross estate includes;$5,000,000 as to the stock.;c. Dustin made a gift of $400,000 in;1995.;d. Dustin made a gift of $3,400,000 in;1995.;e. None of the above is correct.;2358. Question MC #16;In a typical estate freeze involving family limited partnerships established by;parents for their children;a.;By gift, the parents transfer interests as general partners, retaining the;limited partnership interests.;b. By gift, the parents transfer limited;partnership interests, retaining the general partner interests.;c. The interests transferred to the;children involve the control of the business.;d. As to the interests passing to the;children, large discounts are claimed due to the blockage factor.;e. None of the above.;2359. Question MC #17;To prove successful in freezing the value of an interest in a family limited;partnership (FLP), which, if any, of the following techniques is desirable?;a.;The FLP should be created just prior to death to avoid the appearance of being;tax motivated.;b. The FLP should be largely funded with;personal assets (e.g., personal residence).;c. When valuing the FLP interest, apply;a large discount, to provide a safety zone for later bargaining with the IRS.;d. Appraisals of the assets transferred;to the FLP should be avoided, as they tend to limit the size of any discount;claimed.;e. None of the above.;2360. Question MC #18;In 2011, Valerie made a gift of stock (basis of $113,000, fair market value of;$413,000) to her grandson, Ryan. As a result of the transfer, Valerie paid a;gift tax of $20,000. Ryan?s income tax basis in the stock is;a.;$118,000 for gain or loss.;b. $128,000 for gain and $113,000 for;loss.;c. $128,000 for gain or loss.;d. $133,000 for gain or loss.;e. None of the above.;2361. Question MC #19;In 2011, Pam makes a gift of land (basis of $313,000, fair market value of;$913,000) to her granddaughter, Tracy. As a result of the transfer, Pam paid a;gift tax of $45,000. Tracy?s income tax basis in the land is;a.;$358,000.;b. $343,000.;c. $328,000.;d. $313,000.;e. None of the above.;2362. Question MC #20;In 2011, Arlene makes a gift of stock (basis of $813,000, fair market value of;$413,000) to her mother, Elizabeth. As a result of the transfer, Arlene paid a;gift tax of $60,000. Elizabeth?s income tax basis in the stock is;a.;$413,000 basis for gain and loss.;b. $443,000 basis for gain and loss.;c. $813,000 basis for gain and $413,000;basis for loss.;d. $843,000 basis for gain and loss.;e. None of the above.;2363. Question MC #21;In 1989, Tony, a resident of New York, purchases realty for $500,000 listing;title as ?Tony and Ben, joint tenants with right of survivorship.? In 2011;Tony predeceases Ben when the realty is worth $2,000,000. Ben?s income tax;basis in the property is;a.;$0.;b. $250,000.;c. $1,000,000.;d. $1,250,000.;e. $2,250,000.;2364. Question MC #22;In 1990, Jude, a resident of New York, purchases realty for $500,000 listing;title as ?Jude and Tony, joint tenants with right of survivorship.? In 2011;Tony predeceases Jude when the realty is worth $2,000,000. Tony?s income tax;basis in the property is;a.;$0.;b. $250,000.;c. $1,000,000.;d. $1,250,000.;e. $2,250,000.;2365. Question MC #23;Sam and Lucinda are husband and wife and have always lived in a community;property state. At the time of Lucinda?s prior death, part of their community;property includes;Adjusted;Fair;Market;Basis;Value;Stock in Green Corporation;$2,000,000;$1,000,000;Apartment building;3,000,000;6,000,000;Under Lucinda?s will, all of her property passes to Sam. After Lucinda?s death;Sam?s income tax basis in this property is;a.;$3,500,000.;b. $4,000,000.;c. $5,000,000.;d. $7,000,000.;e. $8,000,000.;2366. Question MC #24;The election of ? 2032 (alternate valuation date) for estate tax purposes;a.;Reduces the overall basis of all assets included in the decedent?s estate.;b. Has no effect on the overall basis of;the assets belonging to the surviving spouse?s share of the community property.;c. Means that no assets will end up;having a higher income tax basis than their date of death value.;d. Has no effect on income tax basis if;the heirs chooses not to make the election.;e. None of the above.;2367. Question MC #25;In January 2011, Clint makes a gift of his beach house (basis of $113,000, fair;market value of $413,000) to his aunt. As a result of the transfer, Clint pays;a gift tax of $20,000. The aunt dies in December 2011, when the property is;worth $420,000. Under the terms of the aunt?s will, the property passes to;Clint. Clint?s income tax basis in the beach house is;a.;$118,000.;b. $128,000.;c. $133,000.;d. $420,000.;e. None of the above.;2368. Question MC #26;In April 2011, Tim makes a gift of real estate (basis of $900,000, fair market;value of $800,000) to his aunt. After the gift, the aunt makes $50,000 worth of;capital improvements to the property. The aunt dies in March 2012, when the;property is worth $840,000. Under the aunt?s will, the realty passes to Tim.;Tim?s income tax basis in the property is;a.;$840,000.;b. $890,000.;c. $900,000.;d. $950,000.;e. None of the above.;2369. Question MC #27;In June 2010, Debra makes a gift of securities (basis of $613,000, fair market;value of $913,000) to her uncle, upon which a gift tax of $60,000 is paid. The;uncle dies in July 2011, when the securities are worth $950,000. Under the;terms of the uncle?s will, the securities return to Debra. Debra?s income tax;basis in the securities is;a.;$970,000.;b. $950,000.;c. $633,000.;d. $613,000.;e. None of the above.;2370. Question MC #28;Paul dies and leaves his traditional IRA to Evelyn. Which statement is correct?;a.;Because of the step-up in basis received at death, the IRA causes no income tax;consequences to Evelyn.;b. The IRA is not included in Paul?s;gross estate.;c. If Evelyn is Paul?s surviving spouse;she can roll over the IRA into her own IRA without causing any adverse tax;consequences.;d. If Evelyn is Paul?s daughter, she can;defer any distributions from the IRA until she reaches age 70 1/2 without;causing any adverse tax consequences.;e. None of the above.;2371. Question MC #29;Becky inherited property from her mother seven years ago. The property was;listed on her mother?s estate tax return (Form 706) as having a value of;$300,000. Becky is going to sell the property for $800,000, but she believes;her real income tax basis is much more than $300,000. Which of the following;factors, if any, helps Becky in challenging this basis?;a.;She should file an amended Form 706 showing a higher value.;b. She is not certain what the exact;value of the property was seven years ago.;c. She was the executor of her mother?s;estate.;d. The value listed on Form 706 was not;the result of a negotiated compromise between the IRS and the estate.;e. None of the above.;2372. Question MC #30;In making gifts of property to family members, which of the following generates;income tax consequences to the donor?;a.;Transferring U.S. savings bonds.;b. Transferring an installment note;receivable.;c. Making a contribution to a ? 529 plan;on behalf of the donee.;d. Transferring real estate which has a;potential for depreciation recapture.;e. Choices a. and b. but not c. and d.;2373. Question MC #31;In 2009, Sophia sold real estate (adjusted basis of $500,000) for $1,500,000.;Under the terms of the sale, she received two notes of $750,000 each, with 9%;interest provided. One note is due in 2010 and the other in 2011. She did not;elect out of the installment method of recognizing gain. In 2010 and before the;first note matures, Sophia gives both notes to her adult children. At this;time, the notes are worth a total of $1,400,000. Disregarding the interest;element, a tax result of these transactions is;a.;A gift to the children of $1,500,000.;b. Sophia recognizes no gain.;c. Sophia recognizes a gain of $900,000.;d. Sophia recognizes a gain of;$1,000,000.;e. None of the above.;2374. Question MC #32;Curt owns the following assets which he gives to his daughter Carla in 2009 (no;gift tax results).;Fair;Market;Basis;Value;Land;$200,000;$400,000;Securities;800,000;600,000;Both items have been held by Curt as an investment for more than one year. If;Carla immediately sells these assets;for $1 million ($400,000 + $600,000), she recognizes;a.;No gain or loss.;b. A $200,000 LTCG and no loss.;c. A $200,000 STCG and $200,000 STCL.;d. A $200,000 STCG and no loss.;e. A $200,000 LTCG and $200,000 LTCL.;2375. Question MC #33;Which of the following procedures carried out will reduce both Mary?s future gross estate and her probate estate?;a.;Mary issues a timely disclaimer as to real estate that is willed to her by her;grandfather.;b. Mary creates a revocable trust naming;her children as the beneficiaries.;c. One year before her death, Mary gives;an insurance policy on her life to her son, the designated beneficiary.;d. Mary purchases real estate as joint;tenants with her sister. Mary predeceases her sister.;e. None of the above.;2376. Question MC #34;Which, if any, of the following procedures reduces both Ned?s gross estate and probate estate?;a.;Ned purchased a CD listing title as ?Ned, payable on proof of death to Eileen.?;Eileen is Ned?s niece.;b. Four years ago, Ned named his wife as;the designated beneficiary of his IRA. (Previously, Ned?s estate was the;designated beneficiary.);c. Using her funds, Ned?s wife purchased;real estate listing herself and Ned as ?tenants by the entirety with right of;survivorship.?;d. Five years ago, Ned made a gift of an;insurance policy on his life to his daughter (the designated beneficiary).;e. None of the above.;2377. Question MC #35;In 1990, Gloria purchased as an investment unimproved land for $50,000. In;2011, she sells the land, now worth $200,000, to her church for $50,000. As a;result of this transaction, Gloria reports;a.;No gain and no charitable deduction.;b. No gain and a charitable deduction of;$50,000.;c. No gain and a charitable deduction of;$150,000.;d. A $150,000 capital gain and a;charitable deduction of $200,000.;e. A $37,500 capital gain and a;charitable deduction of $150,000.;2378. Question MC #36;Eric, age 80, has accumulated about $6 million in net assets. Among his assets;are the following marketable securities held as investments.;Basis;FMV;Cardinal Corporation stock;$200,000;$250,000;Crane Corporation stock;300,000;250,000;Hawk Corporation stock;50,000;250,000;Eric would like to donate (either by lifetime or testamentary transfer);$250,000 in value to his church. In addition, to consummate a land deal, he;needs $250,000 in cash. Looking solely to tax: considerations and using only;the assets described above, Eric?s best choice is to;a.;Donate by gift to the church the Crane stock and sell the Hawk stock now.;b. Donate by death to the church the;Hawk stock and sell the Cardinal stock now.;c. Donate by gift to the church the Hawk;stock and sell the Crane stock now.;d. Donate by gift to the church the;Cardinal stock and sell the Hawk stock now.;e. None of the above is an attractive;technique.;2379. Question MC #37;Lisa has been widowed three times. Her first husband died in 2009 leaving an;unused exclusion amount of $3.5 million. The second husband died in early 2011;leaving the entire $5 million exclusion amount unused. Lisa?s third husband;died in late 2012 with an unused exclusion amount of $4 million. Lisa?s DSUEA;is;a.;$3.5 million.;b. $4 million.;c. $5 million.;d. $9 million.;e. $12.5 million.;2380. Question MC #38;After a prolonged illness, Claire has been diagnosed as having a terminal;illness. Which of the following procedures best improves her Federal gift and;estate tax situation?;a.;She makes gifts to family members to help her estate qualify under ? 6166;(extension of estate tax payments relative to an interest in a closely held;business).;b. She issues large notes made payable;to loved ones to increase her future ? 2053 deductions for claims against the;estate.;c. She makes gifts of her life;insurance.;d. She makes enough taxable gifts to;keep from losing any of her $5 million gift tax exemption equivalent.;e. None of the above.;2381. Question MC #39;Which, if any, of the following items characterizes ? 6166 (i.e., extension of;estate tax payments relative to an interest in a closely held business)?;a.;No estate tax due need be paid for the first 5 years.;b. No interest needs to be paid for the;first 5 years.;c. In satisfying the more-than-35% test;for qualification, all interests in;closely held businesses can be aggregated.;d. The 2% rate of interest applies to;the total amount of estate tax value.;e. None of the above.;2382. Question MC #40;For purposes of ? 6166 (i.e., extension of estate tax payments relative to an;interest in a closely held business), an;interest in a closely held business does not include;a.;A sole proprietorship.;b. A 16% interest in a partnership that;has 36 partners.;c. A 22% interest in a partnership that;has 50 partners.;d. A 10% interest in a partnership that;has 48 partners.;e. All of the above.
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