Estate

Question 1

What is the shortcut to determine how much is in the gross estate of a married couple living in a community property state and one spouse dies?

Answer 1

Add up all their assets. Subtract the non-community property assets. Divide the remainder by 2. Add the decedent’s non-community property back to their half, and that give you the gross estate.

Estate 1-7

Question 2

If selling the primary residence within 2 years of the spouse’s death, the widow(er) can claim the Section 121 exemption of ___________ in capital gains.

Answer 2

$500,000

Question 3

If selling the primary residence after 2 years of the spouse’s death, the widow(er) can claim the Section 121 exemption of ___________ in capital gains.

Answer 3

$250,000

Question 4

GSTT paid within 3 years of death ______ included in the decedent’s gross estate.

Answer 4

IS NOT

Question 5

Any gift tax paid out-of-pocket on gifts within three years of death _______ included in the decedent’s gross estate.

Answer 5

IS

Question 6

A single life annuity making payments no longer does once the annuitant dies. Is any value included in the decedent’s gross estate?

Answer 6

No.

Question 7

Which assets might not be included in the gross estate at FMV?

Answer 7

Life estates, remainder interest, reversionary interest, and single (pure) life annuities.

Question 8

What are the three circumstances causing life insurance to be included in the decedent’s estate?

Answer 8

1. Proceeds paid to executor of the decedent’s estate
2. Decedent at death possessed an incident of ownership in the policy
3. Insured transferred a policy with an incident of ownership within three years of death

Question 9

A transfer-for-value/viatical removes the ______ from the owner’s estate, not the ___________.

Answer 9

Policy / Cash received

Question 10

The annual Crummy withdrawal right is equal to the lesser of __________.

Answer 10

the amount of the annual exclusion or the value of the gift transferred.

Question 11

Intrafamily transfer

• Sale of property at FMV in exchange for payments
  1. PV of remaining payments in included in owner’s estate
  2. Property is secured
  3. Gain is capital gain.
  4. Do not use if property subject to recapture (1245 depreciation)

Answer 11

Installment Sale

Question 12

Intrafamily transfer

1. no value included in owner’s estate
2. gain is capital gain
3. assets can be depreciated
4. interest can be deducted
5. higher payout than installment

Answer 12

Self-canceling installment note (SCIN)

Question 13

Intrafamily transfer

(sale of property in exchange for periodic payments)
1. No value included in owner’s estate
2. Property transferred for a promise
3. Taxation to the seller (all the gain which would have been recognized over the life of the ____ will now be taxed in the year established)

Answer 13

Private annuity

Question 14

Intrafamily transfer

1. irrevocable trust that allows grantor to make gifts of property while retaining an income interest
2. At teh end of a term, corpus is distributed to a remainder person
3. Value of gift is discounted (due to retained interest)
4. Owner must outlive term or the asset is brought back into the estate
5. Best asset - one likely to appreciate.

Answer 14

Grantor Retained Annuity Trust

Question 15

Intrafamily transfer

1. At the end of a term, the residence is eliminated from the grantor’s estate.
2. The value of the gift is discounted.
3. Owner must outlive term or asset is brought back into Grantor’s estate.

Answer 15

Qualified Personal Residence Trust

Question 16

Intrafamily transfer

1. Family member receives conduit income. Ineffective if child is under age of 24.
2. Business entity must be capital sensitive. Not available if business is service related.
3. Gifting shares

Answer 16

Partnership/S Corp

Question 17

Intrafamily transfers

1. Qualifies for various “valuation discounts” allowing for a lower gift tax
2. General partner maintains control
3. Gift interest to limited partners to reduce estate

Answer 17

Family limited partnership

Question 18

Intrafamily Transfers

1. Lease payments are a business deduction, income to a family member
2. Do not use if child is under age of 24
3. Gift of fully depreciated property

Answer 18

Gift leaseback

Question 19

A gift to the President of the United States is ______ and ______ produce a taxable gift.

Answer 19

Unlimited / will not

Question 20

A sole proprietorship, an LLC, and a Dynasty trust operate under the ________ principle.

Answer 20

Conduit

This principle allows income received by a trust and immediately passed on to a beneficiary in the same year in which it was received, to be regarded as income which accrued to the beneficiary and not to the trust.

Question 21

A 2302A election requires that the closely held business, ranch or farm comprise _____ % of the decedent’s gross estate and the real property ____%.

Answer 21

50 / 25