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Exam : The American College HS
330
Title : Fundamentals of Estate Planning test

1. An executor elects to value the assets of the estate at the alternative valuation date 6 months after death. Which of the following statements concerning the estate tax value of assets included in this estate is correct?
A. An annuity included in the gross estate that diminishes with the mere passage of time is includible at the date of death value.
B. Property sold before the alternate valuation date is valued at the alternate valuation date.
C. Property that has increased in value since the date of death may be valued at the date of death if the executor so elects.
D. Property distributed under the will before the alternate valuation date is valued at the date of death.
Answer: A

2. Which of the following is an example of a taxable gift for federal gift tax purposes?
A. A father gives his 19-year-old daughter a note promising to give her his Rolls Royce when she reaches the age of 21.
B. Instead of parents paying an outside executive $60,000, a son runs their business for 8 months without charging a fee.
C. The parents of a married son permit their son and his family to use a summer cottage that rents for $3,000 per month on a rent-free basis.
D. A father cancels a $50,000 note his daughter gave him when he made a loan to her 2 years ago.
Answer: D

3. Which of the following types of real property ownership will be deemed to be a tenancy in common?
A. Two brothers own equal amounts of all the common stock in a corporation, the only asset of which is real property.
B. Two brothers own equal undivided interests in a piece of real property, with each brother being able to divest himself of his interest by sale, gift, or will.
C. Two brothers are equal partners in a general partnership that owns a piece of real property used in the partnership business.
D. Two brothers own equal fractional interests in a piece of real property and at the death of one of the brothers the survivor will own the entire piece of property.
Answer: B

4. A father and son have been farming land owned by the father for the past 12 years. Just prior to his death, the father was offered $1,200,000 for his farm because of its possible use as a shopping center. The son would like to continue to farm the land if it can be included in his father’s estate at its current use value. Additional facts are:
1.Average annual gross rentals from nearby farms of similar acreage are $56,000.
2.Average annual state and local real estate taxes on the farm are $8,000.
3.The interest rate for loans from the Federal Land Bank is 8 percent.
For federal estate tax purposes, the farm method valuation formula would result in a current use value for the farm of
A. $500,000
B. $600,000
C. $700,000
D. $820,000
Answer: B

5. The following are facts concerning a decedent’s estate:
Taxable estate $1,700,000
Pre-1977 taxable gifts 200,000
Post-1976 adjusted taxable gifts 50,000
Post-1976 gifts made to a qualified charity 100,000
The tentative tax base of this estate is
A. $1,700,000
B. $1,750,000
C. $1,850,000
D. $1,900,000
Answer: B