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A life insurance trust is often named the beneficiary of the life insurance policies it holds for which of the following reasons?

I It can provide greater flexibility than is available under insurance settlement options.

II It can eliminate a second estate tax upon the death of the beneficiaries.

III It can incorporate special limitations and restrictions on the funds designed to be paid to specific beneficiaries.

A. I only

B. I and II only

C. II and III only

D. I, II and III

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Keith Leannon
Keith LeannonLv2
29 Sep 2019

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1. All the following statements concerning the use of an insured corporate cross-purchase buy-sell agreement are correct EXCEPT:

A. The value of any life insurance policies the deceased owned on the lives of the other stockholders will be included in his or her gross estate.

B. The buy-out will not involve dividend distributions to the deceased’s estate or his or her family.

C. It is preferred over the redemption-type agreement when the stockholders are all in a higher tax bracket than the corporation.

D. The surviving stockholders get an increase in their basis for income tax purposes.

E. It produces greater equity of results than a redemption-type agreement when there is a significant difference in the ages of the stockholders and in their percentages of stock ownership.

2. All the following provisions are usually included in an insured stock cross-purchase buy-sell agreement EXCEPT:

A. A provision giving each surviving stockholder an option to buy a proportionate part of a deceased’s stock.

B. A provision establishing the purchase price to be paid for the stock of a deceased stockholder.

C. A provision committing each stockholder to buy and maintain life insurance on the other stockholders.

D. A provision permitting each surviving stockholder to buy from the estate of a deceased stockholder the life insurance the deceased’s estate owns on the life of each surviving stockholder.

3. All the following statements concerning the tax implications of a gift made to a person who dies within one year of receipt of the gift are correct EXCEPT:

A. If the property is willed back to the original donor, such property is denied the usual stepped-up basis for valuing property transferred to a designated heir.

B. The beneficiary of the deceased’s will can be in receipt of capital gains, even if he or she sells the property on the date of the testator’s death.

C. If the decedent wills the property to someone other than the original owner or his or her spouse, the transferee can have the benefit of the stepped-up basis.

D. If the original donor is the spouse of the decedent-donee, a testamentary disposition to the decedent’s children will prevent realization of the benefits of the stepped-up basis.

4. D and E, a married couple, make a gift of their vacation home to their children but reserve the right to use the property during their lifetimes. Under these circumstances, which of the following statements are correct?

I. The property will be included in the donor’s gross estate at their deaths.

II. The gift tax annual exclusion is not available to D and E.

III. The unified tax credit is available to D and E.

A. I and II only

B. I and III only

C. II and III only

D. I, II and III

5. Which of the following statements most accurately describes the rights conveyed to a minor under the terms of a trust that give the minor a so-called “Crummy” power?

A. The right to withdraw the corpus at any time during minority.

B. The right to accumulate trust income to age 21 and the right to receive these funds as a distribution of corpus.

C. The right to withdraw limited amounts of the trust corpus for a limited time after a contribution is made to the trust.

D. The right to withdraw the trust’s income for the calendar year without a guardian’s approval.

1. “A” is in the 28% marginal income tax bracket. He acquired 400 shares of XYZ Inc. Common stock two years ago for $60,000, but the stock’s current market value is $45,000. “A” plans to give 200 shares of the stock to each of his two granddaughters. Rowena is age 19 and Susan is age 12. Under these circumstances, all of the following statements are correct EXCEPT:

A. If “A” makes the gifts to the children, he will lose the tax benefit of the $15,000 loss available if he sold the stock.

B. “A” can use the $14,000 annual exclusion for both stock gifts.

C. If the grandchildren sell the stock immediately after receiving the stock, they both may take a loss based on “A’s” cost basis.

D. If Rowena keeps her stock, any dividends will be taxable at her marginal income tax bracket.

E. If Susan keeps her stock, any dividends in excess of $1,800 will be taxable at her parent’s marginal income tax bracket.

2. Which of the following statements correctly identify(ies) significant differences between UGMA and UTMA?

I. UGMA places no restrictions on types of property that may be transferred, whereas UTMA does place restrictions.

II. UGMA permits both lifetime and testamentary transfers, but UTMA permits only testamentary transfers.

A. I only

B. II only

C. Both I and II

D. Neither I nor II

3. Which of the following statements concerning the “gross-up” rule is (are) correct?

I. Income taxes paid in the year of death are includible in the deceased’s gross estate.

II. Gift taxes paid in the year of death are included in the deceased’s gross estate.

III. Life insurance given in the year prior to the year of death is excluded from the deceased’s gross estate.

A. I only

B. II only

C. I and II only

D. II and III only

4. All the following statements concerning the income, estate, and gift tax consequences of a gift to a 2503(c) trust for a minor are correct EXCEPT:

A. The income can be accumulated in the trust, but if the income exceeds $2,100 it is taxable to the minor at the parent’s marginal tax bracket.

B. The fair market value of the assets up to $14,000 can qualify for the gift tax annual exclusion.

C. The “throwback” rules do not apply to income accumulated before the minor reaches age 21.

D. Assets transferred to the trust are not includible in the donor’s gross estate for federal estate tax purposes if the donor is not the trustee.

5. A gift of a partial or future interest in property is generally nondeductible.However, there are specific exceptions.A current deduction is available for all the following contributions to a qualified organization EXCEPT:

A. The gift of a remainder interest in a personal residence or farm with the stipulation that the donor may continue to reside there for his or her lifetime.

B. The gift of a remainder interest in real property granted only for conservation purposes.

C. The gift of a remainder interest in tangible personal property with the stipulation that the donor may retain possession of the property during his or her lifetime.

D. The gift of a remainder interest in property where the donor retains an income interest, provided the gift is transferred in trust.

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