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American College Fundamentals of Estate Planning test Sample Questions:

1. Which of the following statements concerning a power of appointment is (are) correct?
1.A power of appointment can be designed to restrict the donee's right to appoint the property in favor of a specific class of recipients.
2.A power of appointment can be designed to restrict the time period during which the donee may
exercise the power.

A) 1 only
B) Both 1 and 2
C) Neither 1 nor 2
D) 2 only

2. A man died in February of this year. Last year, when he learned that he had terminal illness, he immediately made the following gifts and filed the required gift tax return:
Fair Market Value Gift of listed stock to a
*qualified charity $200,000
*Gift of listed bonds to his wife 300,000
*Gift of a boat to his son 10,000
*Gift of a sports car to his daughter 10,000
What amount must be brought back to the man's estate as an adjusted taxable gift in the calculation of his federal estate taxes?

A) 0
B) $200,000
C) $290,000
D) $520,000

3. Alan, a widower, is a retired executive with substantial assets. He wishes to provide for the financial security of his two grandchildren since their father, Alan's son, has always managed money poorly.
This year Alan would like each grandchild to receive a substantial gift.
Which of the following statements concerning the generation-skipping transfer tax (GSTT) on these gifts is (are) correct?
1.Federal estate or gift tax will not be imposed if the gift is otherwise subject to the GSTT.
2.Assuming no prior gifts, Alan can gift a cumulative total of (not including the annual exclusion)
$1.5 million to his grandchildren without the imposition of the GSTT.

A) 1 only
B) Both 1 and 2
C) Neither 1 nor 2
D) 2 only

4. Among the assets in a decedent's gross estate is stock in a closely held corporation that was left to a nephew. The interest passing to the nephew is required to bear the burden of all estate taxes and expenses. The relevant facts concerning this estate are:
*Adjusted gross estate $1,600,000
*Fair market value of stock in the
*closely held corporation 700,000
*Funeral expenses 30,000
*Executor's commission 50,000
*Federal and state death tax 160,000
What amount of closely held corporate stock can be redeemed under IRC Section 303 so that the redemption will be treated as a sale or exchange rather than a dividend distribution?

A) 0
B) $700,000
C) $ 80,000
D) $240,000

5. All the following are conditions that must be met if an otherwise nonqualified terminable interest is to qualify (as QTIP) for the federal estate tax marital deduction EXCEPT:

A) The surviving spouse must be given a lifetime right to receive all the property's income at least annually.
B) No person can be given the right to direct that the property go to anyone other than the surviving spouse as long as the surviving spouse is alive.
C) The deceased spouse's executor must make an irrevocable election to have the property includible in the surviving spouse's gross estate.
D) The surviving spouse must make a qualified disclaimer to all other property in the deceased spouse's estate within 9 months of death.

Solutions: