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CLU > Review > Flashcards

Review Flashcards

0
Q

True or False
IRC Ch 14 - special valuation rules do not permit normal valuation of retained preferred stock that provides qualified payments

A

False

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1
Q

True or False

Grantor trust rules only apply to income taxes

A

True

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2
Q

Who does the 5and 5 rule apply to?

A

Beneficiary of irrevocable trust

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3
Q

What is the ability to lapse the power to withdraw the greater of 5k or 5% of trust principal without transfer tax consequences called

A

5 and 5 rule for beneficiaries of an irrevocable trust

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4
Q

True or false

If you don’t have a will you cannot select heirs

A

True

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5
Q

What is the formula for the maximum amount of federal income tax charitable deduction?

A

50% of the contribution base

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6
Q

Does the marital deduction pally to income taxes?

A

No - it only applies to ESTATE tax

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7
Q

True or false

A surviving spouse can be named as a beneficiary of a qualified plan and have the option to rollover the account balance

A

True

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8
Q

True or false
Charitable remainder trusts allow donors of property to receive a federal INCOME tax deduction for the actuarial clue of the remainder interest

A

True

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9
Q

True or false
Charitable remainder trust allow ESTATE tax deduction for amount passing to qualified charity when the underlying property is included in the donors gross estate

A

True

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10
Q

Yes or no
If the grantor has the power to withhold income & postpone payment to minors, will the income from he irrevocable trust be taxed to the grantor?

A

No

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11
Q

Yes or no
If the power to invade corpus for the benefit of a designated beneficiary is limited by a reasonably definite standard in the trust document, is he income from the irrevocable trust taxed to the grantor of the trust

A

No

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12
Q

Is a grantor responsible for INCOME tax in a revocable trust?

A

Yes

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13
Q

Is a transfer to a revocable trust subject to GIFT tax?

A

No - not considered a completed gift

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14
Q

True or false
To qualify for a CRAT remainder interest must be valued at 10% or more of the contributed property at the time the trust is created

A

True

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15
Q

True or false

You can donate money to a specific scientist for research?

A

False

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16
Q

True or false

Under 6166 - all ESTATE taxes can be deferred

A

False - only taxes related to the inclusion of the business is deferred

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17
Q

Yes or no

Does the marital ESTATE tax deduction apply in divorce?

A

No

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18
Q

Yes or no
Life insurance payable to a testamentary trust where surviving spouse has right to all income & general power of appointment qualifies the trust for the ESTATE marital deduction

A

Yes

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19
Q

True or false
Actual income earned by a trust for 20 years is a permissible payment to a non charitable beneficiary of a qualified charitable remainder trust

A

True - can’t exceed 25 years

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20
Q

Yes or no

Do estate freeze provisions apply to and ILIT

A

No - because no retained interest after the transfer

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21
Q

True or false

Premiums for NQDC plans paid by the employer are deductible for INCOME tax purposes

A

False

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22
Q

True or false

Grantor trust rules apply to gift taxes

A

False - apply to INCOME taxes

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23
Q

True or false

Adjusted gross estate includes the charitable deduction

A

False

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24
Q

True or false

The annual exclusion for bequests is an estate tax concept

A

False - annual exclusions for bequests apply to GIFT taxes

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25
Q

True or false

You can give the IRS an IOU

A

False

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26
Q

True or false

In split dollar life insurance - the employee incurs INCOME tax if the employer pays the entire portion of the premium

A

True

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27
Q

True or false

Sect 2702 only allows trained income rights if the trust consists of only a personal residence

A

True

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28
Q

True or false

Qualified retirement plan accounts are stepped up when included in the deceased participants gross estate

A

False

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29
Q

Yes or no

Does the 3 year rule apply to group life

A

Yes

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30
Q

Yes or no

Divorce has the 3 year rule

A

No

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31
Q

Yes or no

You must have a written property settlement agreement when applying the safe harbor rule in divorce

A

Yes

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32
Q

Yes or no

Can a crummey trust invest in assets other than life insurance

A

Yes

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33
Q

True or false

The gift tax is forgiven if a divorce occurs within 3 yr period beginning 1 yr after property settlement is executed

A

True

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34
Q

Yes or no

Does the 3 yr rule apply to purchase of life insurance by an ILIT - ie purchased by the trustee

A

No - only applies to transferred policies

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35
Q

True or False

The generation-skipping transfer tax is applied only to life insurance payable directly to a skip person as the named policy beneficiary.

A

False - Life insurance proceeds can be taxable under the GSTT if a skip person benefits in any manner

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36
Q

True or False
The gift tax value of a life insurance policy is equal to the cumulative gross premium paid by the donor at the time of the transfer.

A

False - depends on when transferred (face value, interpolated terminal reserve, premium paid, etc)

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37
Q

True or False
One disadvantage of life insurance gifts, compared to gifts of other property, is that the donee immediately becomes financially independent from the donor

A

False - the donee remains dependent on donor for payment of premiums

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38
Q

True or False
The use of the grandparent-grandchild trust will subject the insurance proceeds to federal estate taxation in the parent’s estate.

A

False - no incidents of ownership by insureds

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39
Q

True or False

The annual exclusion from the GSTT is more restrictive than the gift tax annual exclusion

A

True -

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40
Q

True or False

ILIT usually benefits many family members

A

true

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41
Q

True or False

GSTT is for the benefit of one SOLE beneficiary

A

True

42
Q

True or False
The grantor-insured can solve the problem of the irrevocability of an ILIT by retaining the right to purchase the policy from the trustee without adverse tax consequences.

A

False

43
Q

True or False
The grantor of an ILIT RARELY intends that benefits paid to a surviving spouse qualify for the estate tax marital deduction

A

True

44
Q

True or False
The insured can retain the flexibility to reacquire a insurance policy from an ILIT through the terms of the ILIT without adverse tax consequences

A

False

45
Q

True or False

The 3 yr rule applies to a policy transferred to an ILIT

A

True

46
Q

True or False
Adverse estate tax consequences will result if the trustee of an ILIT is directed to pay the grantor-insured’s estate settlement expenses

A

True

47
Q

True or False

The lapse of a Crummey power typically creates a future-interest gift

A

True

48
Q

True or False

the duration Crummey power should be for a short period of time.

A

True

49
Q

True or False

Blockage is relevant only in the valuation of marketable securities

A

False - also includes art

50
Q

True or False
To compute the value of real property under the special-use valuation election, one must know the annual effective interest rate for all new Federal Land Bank loans.

A

True

51
Q

True or False
Fair market value is defined as the price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of the relevant facts.

A

True

52
Q

True or False

A GRAT provides the grantor solely with a fixed annuity during the retained-interest term

A

True - doesn’t matter what the actual income is

53
Q

True or False

A tangible personal property trust is a specific exception to the Sec. 2702 rules concerning trusts with retained interests.

A

True

54
Q

True or False

The Sec. 2702 rules remove any estate planning advantages of a GRIT for any property other than personal residences.

A

True

55
Q

True or False

Subtraction Method is NOT used for outright gifts

A

True

56
Q

True or False
Although Crummey trusts are normally used for life insurance, they make excellent annual-exclusion gift-accumulation vehicles for other property.

A

True

57
Q

True or False
A grantor can sell property to an IDGT without adverse estate tax consequences, provided the trust is not required to reimburse the grantor for income taxes caused by the trust.

A

True

58
Q

True or False
The life insurance held by the partnership on the life of a partner should avoid direct inclusion in the partner’s estate if it is paid to or for the benefit of the partnership

A

True

59
Q

True or False

family partnerships are able to shift taxable income to donee-partners without limit.

A

FALSE - limits imposed

60
Q

True or False

Section 2701 applies to common stock

A

False - preferred only

61
Q

True or False
Sec. 2701 applies if the family (defined with broad attribution rules) controls 50 percent or more of (1) the voting power of a corporation or (2) profit interest in a partnership

A

True

62
Q

True or False

2701 pertains to GIFT Tax

A

True

63
Q

True or False

The assignment of the donor’s rights under a group term life insurance plan WILL result in an income tax deduction

A

True

64
Q

True or False
The maximum federal income tax charitable deduction for contributions of appreciated NON CASH Property to public charities is 30 percent of the donor’s contribution base and 50% for CASH

A

True

65
Q

True or False

While the federal gift and federal estate tax laws impose no limitations on the amount of the charitable deduction

A

True - there is no set $ limit like 14K but there is a % limit

66
Q

True or False
The amount of the federal INCOME tax charitable deduction will depend directly on what type of qualified charitable organization receives the contribution

A

True

67
Q

True or False
The federal income, gift, and estate tax deduction rules are NOT identical with respect to the type of organizations eligible to receive deductible contributions

A

True

68
Q

True or False

A qualified conservation contribution requires that the remainder interest in the property be donated to charity.

A

False - may not all be designed with REMAINDER interests

69
Q

True or False

The inter-vivos charitable lead trust is basically an INCOME-tax-saving measure

A

True

70
Q

True or False
charitable gift annuity is guaranteed by the assets of the charity and is not a promise between the donor and a commercial insurer.

A

True

71
Q

True or False
A CRT makes an appropriate choice as the designated beneficiary of a qualified retirement plan account if the donor desires the maximum deferral of the IRD represented by the plan.

A

True

72
Q

True or False
If a donor creates and funds a CRAT with $1 million and retains a fixed annuity of $80,000 annually for the remainder of her life, the CRAT DOES NOT avoids inclusion in the donor’s estate at her death bc the corpus is necessary to provide the required annuity payments

A

True

73
Q

True or False
The non-charitable beneficiaries are taxed In this order CRT’s ordinary income, capital gains, tax-exempt income, and return of principal - not equally

A

True

74
Q

True or False

charitable remainder trust receives a BOTH federal INCOME tax deduction and a federal GIFT tax deduction

A

True

75
Q

True or False
A remainder interest in a personal residence contributed to charity will be eligible for a tax deduction only if the residence is placed in a trust.

A

FALSE - residence cannot be placed in trust

76
Q

True or false

An immediate income tax deduction will be available for a donor who makes a qualified charity the joint owner of his or her property.

A

True

77
Q

True or False
A contribution to a trust in which the donor retains a life income interest with a remainder to charity will NOT qualify for a current income tax deduction.

A

True - no current interest

78
Q

True or False
One major disadvantage of not drafting a valid will is that federal estate tax liability may be higher because the marital deduction cannot be used as effectively.

A

True - think about the reason for this course :-)

79
Q

True or False
If a divorce occurs less than 2 years after or one year before a husband and wife entered into an agreement involving settlement of marital and property rights, no gift is considered to have been made as a matter of federal gift tax law.

A

True

80
Q

True or False
Common-law states will not respect the community property held by their domiciliary at the time of death, regardless of the status of the property at the time it was acquired.

A

FALSE

81
Q

True or False

The citizenship of the transferor-spouse is irrelevant for the Estate Marital Deduction

A

True

82
Q

True or False
Life insurance proceeds paid to an irrevocable trust created by a citizen-spouse will reduce the need to fund a QDOT benefiting a noncitizen-spouse.

A

True

83
Q

True or False
The individual who creates a power of appointment in another is the person who exercises the power in favor of the donee at some time in the future.

A

FALSE

84
Q

True or False

The current generation-skipping transfer tax rules has 2 exemptions or exclusions

A

True

85
Q

True or False

1 set of operating procedures will apply to the imposition of the generation-skipping transfer tax, depending on when the transfer of the property took place.

A

true - no longer 2

86
Q

True or False
creating a trust to provide income and some principal for a life income beneficiary, the grantor does achieve considerable tax leverage as compared with an outright gift,

A

True

87
Q

True or False

irrevocable living trust: Removed from the grantor’s ESTATE; Completed GIFT

A

True

88
Q

True or False
The creation of an irrevocable trust will remove the transferred property from the grantor’s estate only if he or she irrevocably relinquishes all control and powers over the property

A

True

89
Q

True or False
if a retained power (including power to borrow) may be exercised by the grantor only in conjunction with an adverse party, the trust income will not be taxed to the grantor

A

True

90
Q 
True or False
a power can be given to an independent trustee to sprinkle/apportion income and principal among a class of beneficiaries without causing the grantor to be taxed on the trust income.
A

True

91
Q

True or False

irrevocable trust can be created to ONLY obtain the benefit of separate taxpayers.

A

False

92
Q

True or False

There are no income-splitting advantages through the use of a revocable trust.

A

True

93
Q

True or False
Since the grantor of a revocable trust has not really transferred any significant property interest, the federal tax law for income, gift, and estate tax purposes treats the transfer as if it had never occurred

A

True

94
Q

True or False

Reverse split-dollar plans are designed to provide a sizable death benefit to the Corporation

A

True

95
Q

True or False
The assignment of group term life insurance benefits to a third party is a current gift of the annual value of the benefits for federal gift tax purposes

A

TRUE

96
Q

True or False
A death benefit paid by an employer to the surviving beneficiary of a deceased employee under a death-benefit-only (DBO) plan is included in the gross income of the beneficiary as deferred compensation.

A

True

97
Q

True or False
The death benefits paid to heirs from a nonqualified deferred-compensation plan are subject to estate, but not income, taxation

A

FALSE - benefits are deferred compensation and are treated as IRD

98
Q

True or False
The income taxes payable from a qualified plan or IRA at the death of a participant will generally be due faster if the estate is the designated beneficiary.

A

True

99
Q

True or False

will arrangement fall within the patterns-of-distribution segment of the written estate plan

A

True

100
Q

True or False
The availability of life insurance proceeds will enable the estate to pay the estate tax before the deadline, rather than having to rely on the restrictions of the time-extension provision of the Code

A

True

101
Q

True or False

One disadvantage of using Code Sec. 6166 is that the estate will have to remain open for a 15-year period

A

True

102
Q

True or False
The Secretary of the Treasury may extend the time for payment of any part of the federal estate tax for a reasonable period not to exceed 10 years from the date on which the federal estate tax was originally due to be paid

A

True

103
Q

True or False

reduction of the taxable estate is part of excessive transfer cost

A

True

CLU (16 decks)

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