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American College Fundamentals of Estate Planning test Sample Questions:
1. Harry, Barry, and Carrie incorporated their business, HBC and received 150 shares of stock each. They entered into a cross-purchase buy-sell agreement at this time. The agreement binds their estates to sell their shares of stock to the surviving shareholders. Each shareholder also agrees to purchase one-half of the shares held by the estate of the deceased shareholder. Assume Barry dies sometime later. Which of the following statements concerning this arrangement is (are) correct?
1.When the agreement is carried out, HBC will have 300 shares of stock outstanding.
2.Barry's estate will have additional liquidity to meet expenses and distribution requirements.
A) Neither 1 nor 2
B) 1 only
C) 2 only
D) Both 1 and 2
2. A wife makes outright gifts of $40,000 to her son this year, and her husband agrees to split the gifts with her. Which of the following correctly states the amount of the taxable gifts?
A) Wife $18,000, husband 0
B) Wife $19,000, husband $19,000
C) Wife 0, husband $18,000
D) Wife $9,000, husband $9,000
3. Which of the following provisions is (are) generally common to all buy-sell agreements?
1.Provisions for modification of the agreement.
2.Provisions for lifetime business interest transfer restrictions.
A) Neither 1 nor 2
B) 1 only
C) 2 only
D) Both 1 and 2
4. When the owner of a closely held business dies, the payment of a portion of the federal estate tax may be deferred for a period of several years if the estate otherwise qualifies under the provisions of IRC Section 6166. Which of the following statements concerning this deferral of federal estate tax is correct?
A) The interest rate on the deferred tax is determined by the prime rate in effect on the date of death.
B) To qualify for the tax deferral, the closely held business must represent more than 50 percent of the value of the decedent's adjusted gross estate.
C) The interest on the unpaid estate tax is payable over the first 10 years, after which the tax plus interest on the balance is payable in equal installments for the last 5 years.
D) Under certain circumstances, the estate will forfeit its right to tax deferral, and all the remaining unpaid estate tax will become due and payable immediately.
5. The following are facts concerning a decedent's estate:
*Taxable estate $2,000,000
*Pre-1977 taxable gifts 500,000
*Post-1976 adjusted taxable gifts 300,000
*Post-1976 gifts made to a qualified charity 200,000
A) $2,500,000
B) $2,000,000
The tentative tax base of this estate is
C) $2,300,000
D) $ 400,000
Solutions:
| Question # 1 Answer: C | Question # 2 Answer: D | Question # 3 Answer: D | Question # 4 Answer: D | Question # 5 Answer: C |
By Ward
