Book 6 pages 107 - End Flashcards
true or false?
the best definition of disability for buy-sell agreement purposes is own occupation
true
any interest that in terms of voting is not a controlling interest
minority interest
the theory behind a ___ discount is that a large amount of stock included in the decedent’s gross estate cannot be liquidated at one time without a decrease in the stock’s market price
blockage
the ___ discount is based on the premise that the stock of a closely held business will decline if a key person such as the founder were to die
key person discount
name some types of valuation discounts
minority discount
blockage discount
key person discount
lack of marketability discount
section 6166 is ____
deferred payment of estate tax
to use a deferred payment of estate tax the value of the closely held business must exceed ___% of the adjusted gross estate
35%
to use a special use valuation the value of the property (real and personal) used in the farm or closely held business must be at least ___% of the adjusted gross estate
50%
to use a special use valuation the value of the real property alone must be at least ___% of the adjusted gross estate
25%
to use special stock redemption at time of death the value of the stock must be more than ___% of the adjusted gross estate
35%
true or false?
when using stock redemption in an estate tax situation the disposition of the asset will be treated as ordinary income
false, capital gain
under a reverse QTIP election the ___ deduction will still be available for estate tax purposes
marital
why would a reverse QTIP election be made?
to utilize a deceden’ts GSTT exemption
true or false?
a person who breaches fiduciary duties may be personally liable for damages
true
a(n) ___ is the personal representative of an estate that is named specifically in the decedent’s will
executor
a(n) ____ is a personal representative of an estate appointed by a court, if the decedent died without a valid will or failed to name an executor in the will
administrator
true or false?
a grandchild is considered a skipped person for GSTT purposes
true
an unrelated person who is younger than the transferor by ___ years or more is considered a skipped person for GSTT
37.5
____is gross income the decedent had earned and was entitled to at death but had not yet received
income in respect of a decedent
true or false?
IRD (income in respect of a decedent) is considered income for federal income tax purposes
true
true or false?
forgiveness of debt at death of an installment note is an example of IRD
true
what amount is included as IRD if when a forgiveness of debt at death is realized?
the entire amount of any remaining unrecognized gain
true or false?
salary received after the date of death is considered IRD
true
is rental income and interest accrued but unpaid at time of death considered IRD?
yes
true or false?
annuity payments are not considered IRD if received after death
false, they are
who usually includes IRD in their income for income tax purposes?
the beneficiary of the decedent or the estate
true or false?
all IRD is taxed as capital gain to the beneficiary
false, it is taxed the same way it would have been to the decedent (i.e. if IRA distribution then you have ordinary income)
true or false?
IRD assets allow for a step up in basis
false, the decedent’s original basis carries over to the new owner
is IRD included in the gross estate of the decedent?
yes
true or false?
there is a tax deduction allowed for IRD
true
When Mike died his gross estate included a qualified plan worth $700k. The total estate tax liability for Mike’s estate was $2million. The estate tax liability would have been $1.6 million if the qualified plan was excluded from his gross estate. Mike’s son George is a beneficiary of the qualified plan and received a taxable distribution this year of $350k. What income tax deduction is allowed to George this year?
$200k
($350k / $700k) x $400k
if the IRD income tax deduction is claimed it is a _____ deduction not subject to the 2% of AGI floor
miscellaneous itemized
an estate must report income of the estate if the estate has gross income of $____ or more
$600
true or false?
personal interest is deductible on an estate tax return
false
true or false?
trade or business interest is deductible on an estate tax return
true
true or false?
investment interest is deductible on an estate tax return
true
true or false?
qualified residence interest is not deductible on an estate tax return
false, it is
true or false?
executor fees are gross income to the executor
true
the waiver of executor fees may not be beneficial if _________
the spouse executor’s marginal tax bracket is lower than the marginal estate tax rate
true or false?
medical expenses paid within one year of death are deductible on the decedent’s final income tax return and the estate tax return at the same time
false, it can only be one or the other
true or false?
if medical expenses are deducted on the estate tax return there is no limit on the deduction
true
a disclaimer by the spouse in favor of children reduces the use of ___ deduction and helps avoid ____
marital ; overqualification
a disclaimer by the children in favor of the spouse increases the use of ___ deduction and helps avoid ___
marital ; underqualification
permits the decedent spouse to provide lifetime income to the surviving spouse but control who receives any property remaining after surviving spouse dies
QTIP
true or false?
QTIP property must be included in the surviving spouse’s gross estate when they die to the extent it has not been spent or consumed before surviving spouse’s death
true
if a beneficiary is an higher marginal bracket than the estate’s marginal bracket they would most likely benefit from a valuation date that offers the ____ basis in the asset inherited
higher
true or false?
the portability provision is available for nonspouses
false
true or false?
the marital deduction is available for same sex spouses
true
true or false?
surviving cohabitants have no intestacy rights to the decedent’s proeprty
true
true or false?
tenancy in common property avoids probate?
false
true or false?
tenancy in common property will only include the decedent’s share of the property in their estate
true
true or false?
JTWROS property will include the entire value of the property in the decedent’s gross estate
true
true or false?
JTWROS property avoids probate?
true
true or false?
a revocable trust avoids probate if assets are transferred to the trust during the client’s lifetime
true
