Eastern Illinois University FIN 4300 Final Exam Topics Calculations will be required for items in bold.

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Eastern Illinois University

FIN
4
300

Final Exam

Topics



Calculations will be required for items in bold.




Introduction to Estate Planning

Chapter 1

1)

Goal of Estate Planning

a)

Common Goals and Objectives

b)

Impediments to Reaching Goals

2)

The Six Basic Steps in

Estate Planning

3)

Establish the Client/Planner Relationship.


Basic Estate Planning Documents

Chapter 2

1)

Basic Documents in an Estate Plan

a)

Wills

i)

Intestacy

ii)

Advantages


iii)

Limitations of Wills

iv)

Types of Wills

v)

Common Clauses in Wills

vi)

Revoking a will

vii)

Side Instruc
tion Letter

viii)

Provision in wills

b)

Power of Attorney

i)

Medical

c)

Living Wills/Advance

d)

Do Not Resuscitate Order


Types of Property Interests

Chapter 3

1)

Types of Property

2)

Tenancy in Common

3)

Joint Tenancy (JTWROS)

4)

Tenancy by the Entirety

5)

Community Property

6)

Life Es
tate/Interest for Term



The Probate Process

Chapter 4




1)

The Probate Process

a)

Testate vs. Intestate

b)

Advantages of Probate

c)

Disadvantages of Probate

d)

Nontraditional Relationships

2)

Steps In The Probate Process

a)

Appointment of executor (testate) or administrato
r (intestate).

b)

Hearings after notice to interested parties

c)

Accountings to the court

d)

Pay debts and costs.

e)

Manage and distribute estate.

3)

Items Passing Outside Probate


Gift Tax

Chapter 5


1)

The gift tax is an excise tax

a)

Sunsets in 2011

2)

Parties to a Gift

a)

Dono
r (person who makes a gift)

b)

Donee (person who receives a gift)

3)

Definition of Gifts

4)

Direct Gifts

5)

Indirect Gifts

6)

Bonic
-
Market Loan

7)

Complete vs. Incomplete Gifts

8)

Reversionary Interests

9)

Valuation of a Gift

10)

Annual Exclusion

a)

Non
-
U.S. citizen spouses

11)

Split Gifts

12)

Gifts of a Present Interest

a)

Crummey Provision

b)

5/5 Lapse Rule

13)

Qualified Transfers

14)

A qualified transfer is a payment for someone else paid directly to a:

15)

Payments for Support

16)

Gifts to Spouses

17)

Charitable Gifts

18)

Income Tax Issues

19)

Gifting Strategies


Estate Ta
x

Chapter 6



1)

Estate Tax Formula

2)

The Gross Estate

a)

2033


Property Owned at Death

b)

2035


Three
-
Year Lookback

c)

2036


Transfers with a Retained Interest

d)

2037


Transfers Taking Effect at Death

e)

2038


Revocable Transfers

f)

2039


Annuities

g)

2040


Jointly Owned

Property

h)

2041


Powers of Appointment

i)

2042


Proceeds of Life Insurance

j)

2044


QTIP Property

3)

Appraisals

a)

Closely held business

b)

Valuation discounts

i)

Minority discount

ii)

Lack of marketability discount

iii)

Blockage discount

iv)

Key person discount

c)

Financial Securities

d)

A
lternate Valuation Date

4)

Deductions from the Gross Estate

a)

Funeral expenses

b)

Last medical expenses

c)

Administration expenses

d)

Debts

e)

Losses during administration

5)

Adjusted Gross Estate

6)

Less Marital deduction

7)

Less Charitable deduction

8)

Equals Taxable Estate

9)

Plus P
ost ‘76 gifts

10)

Equals Tentative Tax Base

11)

Tentative Tax

12)

Credits

a)

Applicable estate tax credit

b)

Prior transfer credit

13)

Estate Tax Liability


Transfers During Life and at Death

Chapter 7


1)

Installment sale


note from buyer to seller.

2)

Transfers Not Subject to G
ift Tax

a)

Legal Support

b)

Qualified Transfers

c)

Transfer to Spouses

d)

Some
Bonic
-
Market Rate Loans

3)

Lifetime Transfers

a)

Intrafamily loans

b)

Gifts Outright and in Trust

c)

Partial Sale
-
Gift Transactions

4)

Full Consideration Transfers/Sales

a)

Private Annuities

b)

SCIN

c)

Grantor Ret
ained Annuity Trust (GRAT)

d)

Qualified Personal Residence Trust (QPRT)

e)

Family Limited Partnerships (FLP)


Trusts

Chapter 8


1)

Parties

a)

Trustee

i)

Duty of loyalty and care

b)

Beneficiary

i)

Income


right to income.

ii)

Remainder


right to property when trust terminates.

2)

Us
es

a)

Management

b)

Creditor protection

c)

Split interests in property

d)

Avoid probate (living trust)

3)

Trust Duration


The Rule Against Perpetuities

4)

Taxation of Trust

a)

Simple trust


mandates distribution of income.

b)

Complex trusts


permits accumulation of income.

5)

C
lassification of Trust Arrangements

a)

Revocable trusts

b)

Irrevocable trusts

c)

Testamentary trusts

d)

Standby trust

e)

Pourover trust

f)

Grantor trust

g)

Trusts Used in Estate Planning

i)

Inter Vivos Revocable

ii)

Inter Vivos Irrevocable

iii)

Life Insurance (ILIT)

iv)

Power of Appointment
Trust

v)

Qualified terminable interest property (QTIP) trust

vi)

Grantor Retained Income/Interest Trusts (GRITs)

vii)

GRATS, GRUTS, QPRTS, TPPTs.

viii)

Dynasty Trusts

ix)

Trusts for minors


Sec. 2503(b) and Sec. 2503(c) trusts.

x)

Charitable trusts

xi)

Totten trusts

xii)

POD accounts (no
t really trusts).

xiii)

Blind trusts

xiv)

Revocable trust used when self management might be a conflict of interest (e.g., a politician).


Charitable Giving

Chapter 9



1)

Charitable contributions

a)

Qualified organizations

b)

Public charity: charitable, religious, education,

government

c)

Private charity: foundation

2)

Lifetime Charitable Gifts

3)

Amount deductible

a)

Cash

i)

50%: public charity

ii)

Carryover for five years

b)

Capital gain property: deduct FMV

i)

30%: public charity

ii)

Elect 50% limit if use basis instead of FMV

c)

Tangible personal proper
ty

i)

Related use (car to car museum): deduct FMV

ii)

Unrelated use: deduct cost

4)

Substantiation

a)

Noncash contributions

i)

Over $500: attach Form 8283 including description

ii)

Over $5,000: must have qualified appraisal

5)

IRA Contributions

6)

Charitable Trusts

a)

CRAT

b)

CRUT

c)

Pooled

income fund


Unlimited Marital Deduction

Chapter 10


1)

Unlimited Marital Deduction

a)

Advantages

b)

Disadvantages

2)

Exceptions to terminable interest rule

a)

Survivorship clauses

b)

If spouse holds power of appointment over assets

c)

Charitable Remainder Trusts

d)

QTIP: qualif
ies for marital deduction

i)

Requirements

e)

QDOT: Non
-
citizen spouse

i)

Requirements

3)

Bypass Trusts

Life Insurance

Chapter 11


1)

Term insurance

2)

Universal life

a)

Variable universal life

3)

Whole life

4)

Objectives of Life Insurance

5)

Parties to a Life Insurance Policy

6)

Income Ta
x Treatment of Life Insurance

a)

Policy exchanges 1035

b)

Accelerated death benefits

7)

Gift Tax Treatment of Life Insurance

8)

Federal Estate Tax Treatment of Life Insurance

a)

I.R.C. Sec 2033


Life insurance on someone else’s life

b)

I.R.C. Sec. 2035


The three year r
ule

9)

Life Insurance Trust (ILIT)


Special Needs and Post Mortem Planning

Chapter 12



1)

Liquidity Needs

a)

Last medical costs

b)

Funeral costs

c)

Transition or adjustment period costs

d)

Administrative costs

e)

Income, estate and generation skipping transfer taxes

2)

Liquidity

Sources and Implications

a)

Sale of assets

b)

Life insurance

c)

Tax advantaged accounts


qualified plans, IRAs

d)

Corporate redemption from closely held businesses

e)

Loans for payments of taxes and other costs

3)

Joint or Separate Final Income Tax Return

a)

Surviving spou
se

b)

Passive and Capital Losses

c)

Expense Elections

4)

Selection of tax year

5)

Expense Elections

6)

Waiver of Executor’s Fees

7)

Charitable bequests

8)

Gift Tax Issues

9)

Valuation of assets

a)

Alternate valuation date

10)

Installment Payments of Estate Tax (6166, 6161)

11)

Special Use

Valuation (2032A)

12)

Disclaimers

13)

QTIP Election


Generation Skipping Transfers

Chapter 13


1)

Parties Involved in Generation Skipping Transfers

2)

Types of Taxable Transfers

3)

Exclusions

a)

Annual Exclusion

b)

Split gifts

4)

GST Exemption

5)

Applicable Rate

6)

Inclusion Ratio

7)

Applicable Fraction

8)

Dynasty Trusts

a)

Basic Structure and Types of Dynasty Trusts


Enter your answers for the following questions on a separate sheet of paper with your name on it and
bring this paper to class. These answers will be collected at the start
of class prior to the review.


Questions: 7,12,24,27,57,68,77,90,104,117


1)

Which of the following statements is correct?

a)

To die
in
testate is to die without a valid will.

b)

A simultaneous death clause provides an assumption of
the oldest

spouse dies first in

the event that both
spouses die simultaneously.

c)

A no contest clause allows property to pass from one party to another without gift tax consequences.

d)

M
erman
Malburg

has willed his business, which h
e owns JTWROS with his sister M
ary, to his son,
M
erbert.
W
hen
M
erman dies,
M
erbert will inherit half of the business.


2)

Which of the following is not an estate
-
planning objective?

a)

Fulfill client’s property transfer wishes.

b)

Minimize taxes.

c)

Increase the size of the probate estate.

d)

Provide needed liquidity.


3)

A h
andwr
itten will dated and signed by the testator

is a __________ will
.

a)

holographic

b)

nuncupative

c)

statutory

d)

testamentary


4)

Which of the following is true regarding powers of attorney?

a)

A general power of attorney creates a taxable gift to the holder of the general p
ower of attorney

b)

The powers are
revocable.

c)

The power continues after death.

d)

The principal
giving the power of attorney
must be
approved by the probate court.


5)

Which of the following
generally
details the testator’s wishes regarding the disposition of tangi
ble

possessions, the
disposition of the decedent’s body, and funeral arrangements?

a)

Will.

b)

Codicil.

c)

Side instruction letter.

d)

Tangible possession trust.


6)

Which of the following is
not

a duty of an executor?

a)

Locates and proves the will.

b)

Notifies creditors of t
he death of the decedent
.

c)

Receives letters testamentary from court.

d)

Petitions court for his or her appointment.

e)

Witnesses the will.


7)

Which of the following is a community property state?

a)

New York
.

b)

Ohio
.

c)

Illinois
.

d)

Oregon

e)

California.


8)

M
alph
Malburg

has the a
ssets

listed

below
. Which assets will go through probate?

(i)

Life insu
rance; b
eneficiary is his wife M
olanda.

(ii)

IRA; no b
eneficiary

(iii)

Personal residence; i
n
a living

trust.

(iv)

Auto; Mr.
Malburg

is the sole owner.

a.

ii

only.

b.

iv

only.

c.

ii and iv
.

d.

ii, iii, and iv
.

e.

i, ii,

iii
,
and iv
.


9)

Which of the follow
ing assets wou
ld be part of
Gravy

Grady’s

probate estate: a home owned by him

as an individual;
a car in joint tenancy with his wife; common stock held as an equal tenant in

common with his brother; and land
held in a rev
ocable living trust.

(i)

Home

(ii)

Car

(iii)

Stock

(iv)

Land

a.

(i), (ii
), and (
iv
) only are correct.

b.

(ii) and (iv
) only are correct.

c.

(i) and (iii
) only are correct.

d.

(iv
) only is correct.

e.

All are correct.


10)

Phog

E.

Park

purchases a vacation condo for $150,000, taking title in joi
nt tenancy with his two

children.
What
would be the tot
al taxable gifts shown on
Park
’s gift tax return?

a)

$126
,000

b)

$100,000

c)

$74
,000

d)

$37
,000

e)

$24
,000


11)

If
Mr.
Park

died when the condo was worth $240,000, insofar as the condo is concerned what

value would be
in
cluded in his gross estate?

a)

$50,000

b)

$80,000

c)

$12
0,000

d)

$16
0,000

e)

$240,000


12)

Which of the following is not a transfer tax?

a)

Gift tax

b)

Federal estate tax

c)

Income tax

d)

GSTT


13)

Which of the following is generally not one of the members of the estate planning team?

a)

attor
ney

b)

loan officer

c)

CPA

d)

life insurance consultant

e)

trust officer


14)

Which of the following is not correct?

a)

If a trust is created inter vivos, it is created “at death.”

b)

A revocable trust will avoid the costs and process of probate, but will not reduce federal est
ate taxes.

c)

A grantor trust is a trust in which the grantor transfers property into a trust but the grantor retains some right
of enjoyment of the property.

d)

The assets selected for a QTIP trust qualify for the unlimited marital deduction.


15)

Which of the fol
lowing is correct?

a)

The valuation of property included in the gross estate is either the fair market value at the date of death, or if
properly elected, the value for the alternate valuation date (nine months from the date of death).

b)

A general power of app
ointment is a power to appoint assets to anyone, including the power holder.

c)

both a) and b)

d)

neither a) or b)


16)

Which of the following is correct?

a)

At the end of the QPRT term, the

residence reverts back to the g
rantor.

b)

A charitable lead trust (CLT) is a s
plit interest trust where a charity is the income beneficiary and there is a
non
-
charitable remainderman.

c)

both a) and b)

d)

neither a) or b)


17)

Which of the following is not a feature of a testamentary trust?

a)

It is created by the will.

b)

It
will

shift an income
tax burden to a lower
-
bracket taxpayer.

c)

It is included in the gross estate.

d)

It does not avoid probate.


18)

Sally
Seelhoefer

gave the following gifts during the current year:

Son $25
,000
;
Daughter $8
,500
;
Ex
-
Husband

$20
,000
.
What is the amount of taxable gifts

Ms.
Seelhoefer

made?

a)

$7,000

b)

$12,000

c)

$14,500

d)

$19
,000

e)

$19,500


19)

Gladys and G
eorge
Gallaher

made the following gifts during the current year:

$27
,000
t
o
their
daughter
;
$6
,000

t
o
their
son
;
$
33
,000

t
o

their
granddaughter
. If the
Gallaher
s

split gifts, what wo
uld their taxable gifts be?

a)

0

b)

$2
,000

c)

$
8
,000

d)

$2
6,000

e)

$
60
,000


20)

Which of the following is correct regarding the annual exclusion?

a)

To qualify for the annual exclusion, the gift must be a completed gift, either of a future or

present interest.


b)

The annual e
xclu
sion can be increased to $26
,000 if gift splitting of community property

is elected.

c)

Gift
s to all individuals must be $13
,000 or less to not be taxable.

d)

Including a Crummey withdrawal provision in a trust will permit contributions to the trust to qualify f
or the
annual exclusion.


21)

Which of the following is true regarding a QTIP Trust?

a)

A QTIP must be used if the surviving spouse is a nonresident alien.

b)

Trust income must be paid to the spouse or beneficiary
designated by the spouse
at least annually.

c)

The trus
t assets will be included in the gross estate of the surviving spouse.

d)

The surviving spouse determines the remainder beneficiaries.


22)

Which of the following is
not
correct regarding the credit equivalency trust?

a)

The remainder beneficiary is generally the
ch
ildren
.

b)

The assets are
not
taxed in the estate of the first spouse to die.

c)

In 2012
, as
sets of
$5,12
0,000 would be transferred to a credit equivalency trust.

d)

The income beneficiary
can invade the trust after they reach the age of 591/2
.


23)

Harley

Park
, a weal
thy widow, is interested in reducing her gross estate. Which of the following

techniques would be
least likely to help her accomplish her goal?

a)

Placing
Apple stock

which is expected to increase in value
into a
GRAT
.

b)

Selling
land

currently valued at $5
0
,000

but expected to greatly appreciate

to a child in an installment sale
.

c)

Utilizing gifts of $13,000
to transfer property

to a
grand
child
.

d)

Establishing a POD account with her children as the beneficiaries.


24)

M
onda
Malburg
,
age 64, lives with her husband M
alph
in Illinois. Rhonda inherited a vacation home in Maine from
her uncle,
Pork Chop
Park
. Which of the following forms of ownership would you recommend for the vacation
home?

a)

tenants in common

b)

living trust

c)

sole ownership

d)

community property


25)

Ba
lice

and
Ba
nvi
l

Bonic
, life
-
long residents of Dime Box, Texas, paid $100,000 for their home five years ag
o. Its fair
market value when
Ba
nvil

died la
st week was $150,000. What is
Ba
lice
’s basis in the home after the Ba
nvil
’s death?

a)

$50,000

b)

$75,000

c)

$100,000

d)

$125,000

e)

$1
50,000


26)

Syrtle and S
arvin
Seelhoefer
, residents of Effingham, Illinois, own 40 acres of farmland as joint tenants with rights of
survivorship. Myrtle owns a $250,000 certificate of deposit in her name only and Marvin owns a $100,000 in his
name only. Th
e
Seelhoefer

have no debts. Mrs.
Seelhoefer

s last will provided

“all of my assets at death shall be
divided in three equal portions among my children and my husband”. If Mrs.
Seelhoefer

dies today, leaving Mr.
Seelhoefer

and their two children as heirs,

which of the following statements is correct?

a)

the children will inherit two
-
thirds of the $250,000 CD and one
-
third of the farm.

b)

the children will inherit two
-
thirds of the $250,000 CD and no interest in the farm.

c)

the children will inherit two
-
thirds of
the $250,000 CD and one
-
half of the farm.

d)

the children’s share of the $250,000 CD and the one
-
third interest in the farm will be subject to probate.

e)

Mr.
Seelhoefer

can elect to take against the will and receive all of his wife’s assets


27)

Two weeks after Syr
tle’s death, S
arvin is killed by a stampeding elephant at a circus. His will provides that “I hereby
give all my real property to my brother Misfit and I give all my personal property to my children equally”. Which of
the following statements is true?

a)

Th
e children will receive Mr.
Seelhoefer

s CD and the farm.

b)

The children will receive neither the CD nor the farm.

c)

Mr.
Seelhoefer
’s CD is subject to probate but the farm is not.

d)

None of Mr.
Seelhoefer
’s assets are subject to probate.

e)

The children will inheri
t the CD and Misfit
Seelhoefer

will receive the farm.


28)

A
lthough he has a vast fortune, M
oger
Malburg

has decided not to prepare an estate plan because he believes that
his surviving family members will divide up his assets appropriately. Which of the follo
wing is not a risk associated
with failing to plan an estate?

a)

Malburg
’s estate will incur excessive transfer taxes.

b)

Malburg
’s favorite Corvette will not
be transferred to his
girl friend
,
Mallet
, who owns the car with Moger
as
tenants in common

c)

Malburg
’s i
nsurance policy on his own life will not be paid out to the named beneficiary.

d)

Malburg
’s current wife, M
ucille, will not provide for
Malburg
’s children from a previous marriage.


29)

M
ellie
Malburg
, who is not a licensed attorney, recently started her own fina
ncial planning practice. Which of the
following activities would be considered the unauthorized practice of law?

a)

Preparing a
side instruction letter

for her client
s
.

b)

Helping clients to identify their financial planning goals.

c)

Preparing
a
n

ILIT

for prospect
ive clients.

d)

Ref
erring clients to her brother, M
ack, who happens to be a licensed attorney.


30)

P
abby
Park

is getting ready for her first meeting w
ith her new financial planner, M
erbert
Malburg
. What information
does
Park

not need to bring to this meeting?

a)

Pr
eviously filed income tax and gift tax returns.

b)

A copy of her current will.

c)

A detailed list of
Park
’s assets and liabilities.

d)

A copy of Pabby’s birth certificate
.


31)

Under which of the

following circumstances would the decedent
be considered to have died int
estate?

a)

The decedent handwrote a will, but did not sign or date it.

b)

The decedent was not of “sound mind” when he signed his statutory will.

c)

The decedent failed to prepare a last will and testament.

d)

All of the above.


32)

Harlow

Harris

recently prepared a last
will and testament in which he left all o
f his assets to his girlfriend H
. Mo.
Harris and H
. Mo broke up last night and now
Harris

wants to leave all of his worldly possessions to his best friend,
Horace
. What can
Harris

do to prevent L
. Mo from receiving
any of his assets?

a)

Harris

can shred the will under which H
. Mo receives all of his assets.

b)

Harris can send H
. Mo an email telling her that he is cutting her out of his will.

c)

Harris

can tell
Horace

that he plans to write a new will.

d)

Harris

can give the will

to
Horace
.


33)

R
om
Reardanz

is considering having his attorney prepare a
general
power of attorney in which his gives his friend,
Chainsaw, the power to handle his finances. Why should
Reardanz

include such a document in his overall estate
plan?

a)

In the event

that
Reardanz

becomes disabled, Chainsaw will be able to pay
Reardanz
’s bills.

b)

Chainsaw can make decisions regarding
Reardanz
’s health care
.

c)

Chainsaw is only 16 years old and Rom woul like to adopt him.

d)

Reardanz

wants
to reduce his probate estate
.


34)

M
e
gbe
rt
Malburg
, a real estate mogul, dies owning a great deal of real property. Which of the following would be
included in
Malburg
’s probate estate?

a)

A building owned fee simple by
Malburg
’s wife.
Malburg

and his wife do not live in a community property state.


b)

A vacant lot owned joint tenancy with rights of survivorship by
Malburg

and his brother.

c)

A beach house owned tenancy in common by
Malburg

and his mother.

d)

An office building owned tenancy by the entirety by
Malburg

and his wife.


35)

M
adys
Malburg
, age 86, a
nd Buffo Biceps, age 23, have been in a long
-
term relationship.
Malburg

wants to make
sure that if she dies first, Biceps will be provided for. Which of the following would you be likely to recommend to
fulfill
Malburg
’s goal of transferring assets to Bice
ps at
Malburg
’s death?

a)

Name Biceps as the beneficiary of
Malburg
’s retirement plan.

b)

Transfer the ownership of
Malburg
’s real estate investments into Tenancy by the Entirety.

c)

Advise
Malburg

against writing a will that specifically bequeaths assets to Biceps
.

d)

Recommend that
Malburg

and Biceps move to a community property state.


36)

Putty

Park
, age 84, owns a farm jointly with rights of survivorship in Coles County with his wife FiFi, age 19. The
farm was originally purchased by
Putty

in 1942 for $10,000. In 20
09
, when the farm was valued at $900,000,
Putty

changed the ownership of the farm to joint ownership with his charming new wife. Three days later,
Putty

died
when FiFi accidentally ran over
Putty

with a combine. What amount will be included in
Putty
’s
pr
obate

estate for
the farm land?

a)

0

b)

$10,000

c)

$450,000

d)

$900,000


37)

What amount will be included in
Putty
’s
taxable

estate for the farm land?

a)

0

b)

$10,000

c)

$450,000

d)

$900,000


38)

Seven months after
Putty
’s death, the grieving FiFi sells the farm for $1,150,000. What is
the capital gain for FiFi as
a result of this sale?

a)

0

b)

$250,000

c)

$695,000

d)

$700,000

e)

$1,140,000


39)

Gladys

Gallaher
, age 84, owns a farm in Sacramento, California

with her husband,
G
i
m
p
, age 19. The farm was
purchased by the
Gallaher
s in 2006 for $710,000. In 2
007, when th
e

farm was valued at $870,000,
Gladys

died
when
Gimp

thought she was a wild turkey and he accidentally

shot her. Seven months after
her

death, the grieving
Gimp

sells the farm for $930,000.

What is the capital gain for
Gimp

as a result of thi
s sale?

a)

0

b)

$60,000

c)

$14
0,000

d)

$220,000


40)

The first step in the estate planning process includes:

a)

Meeting with the client and discussing the client’s assets, family structure, and desires.

b)

Prioritizing the client’s goals.

c)

Developing a formal written estate plan
.

d)

Identifying key areas of concern in relation to the client’s plan
-

taxes, cash on hand, etc.


41)

Melly

Malburg

does not want to write a will. It upsets
her

to contemplate
her

own death and
s
he simply desires to
avoid the estate planning process. Which of t
he following is not a risk
Melly
’s estate may face because of
Melly
’s
inaction?

a)

Melly
’s property transfers contrary to
her

wishes.

b)

Melly
’s estate may face liquidity problems.

c)

Melly
’s estate faces increased estate administration fees.

d)

Melly
’s estate faces i
ncreased debt payments for outstanding debts at death.


42)

Honcho

Harris
, a resident of Tuscola, Ilinois, died without a will. She is survived by a son, a cousin and her
grandmother. Who will inherit her assets she owned individually?

a)

her son

b)

her cousin

c)

he
r grandmother

d)

her son, cousin, and grandmother will receive one
-
third of the assets

e)

the state of Illinois


43)

R
ellie
Reardanz

is married and owns and mana
ges several rental properties. Sh
e is concerned that if
s
he became
incapacitated, the properties would n
ot be properly managed and
her

tenants would be upset. Of the following
arrangements, which one could fulfill
Reardanz
’s desire to plan for the management of
her

rental properties in the
case of his unanticipated physical or mental incapacity?

a)

A durable po
wer of attorney.

b)

Owning the property as
tenants in common with her husband
.

c)

Owning the property as tenancy by the entirety.

d)

All of the above.


44)

After listening to a popular radio financial planning talk show,
Leroy

Harris

decided to grant a durable power of

attorney to her neighbor,
Shredder
. All of the following statements regarding the durable power of attorney are
correct except?

a)

At the creation of the durable power of attorney,
Harris

must be at least 18 years old and competent.

b)

The power can spring at
a certain age or event.

c)

After
Grady

death, the power remains in force.

d)

If
Harris

becomes disabled, the power remains in force.


45)

Greasy

Grady
’s

cousin
G
obo

gave her a general power of appointment over his assets. Disregarding any fidicuary
problems, which
of the following is not true regarding the power?

a)

Greasy

can pay for her own groceries with her cousin’s
money
.

b)

Greasy

can pay for
Gobo
’s groceries with
Gobo
’s
money
.

c)

Greasy’s

gross estate will include
Gobo
’s assets if
Greasy

dies before
Gobo
.

d)

The general
power of appointment only allows
Greasy

to appoint
Gobo
’s assets for expenditures related to
health, education, maintenance, or support.


46)

Which of the following documents appoints a surrogate decision
-
maker for health care?

a)

Durable power of attorney for he
alth care.

b)

General power of appointment.

c)

Life insurance beneficiary designation.

d)

All of the above.


47)

Which type of will is handwritten and does not generally require a witness?

a)

Holographic.

b)

Oral.

c)

Nuncupative.

d)

Statutory.


48)

While he was in the hospital,
Sam

Se
elhoefer

told his wife that if he died he wanted to give his fishing tackle to his
son,
Skip
; his golf equipment to his son,
Scoop
; his truck to his daughter,
Scotch
; and everything else to her (his
wife).
Seelhoefer

died the next day without writing anyth
ing that he told his wife, but a nurse and another patient
were in the room and heard his declarations. What type of will does
Seelhoefer

have, if any?

a)

Holographic.

b)

Nuncupative.

c)

Statutory.

d)

Seelhoefer

does not have a will.


49)

Gravel

Grady
’s

will leaves her ca
r to her brother, her boat to her sister, and her vacation home to her cousin. Her
will directs the remainder of her assets to be divided equally amongst her two children.
Grady
’s

will directs all debts
and taxes to come from the children’s assets. Of the
following, which are included in
Grady

will?

(1)

Residuary clause.

(2)

Specific bequests.

(3)

Payment of debts and taxes clause.

(a)

1 only.

(b)

3 only.

(c)

1 and 3.

(d)

1, 2, and 3.


50)

Sailfish

Seelhoefer

s will leaves all of his property to his wife. If she does not survive him by mo
re than
six

months,
the property will transfer to
Seelhoefer
’s only son.
Seelhoefer

dies on April 13
th

and his wife dies the following
October 10th
. Of the following statements, which is true?

a)

Seelhoefer
’s

property will transfer to his son.

b)

Seelhoefer
’s

pr
operty will transfer to his wife

and qualify for the unlimited marital deduction
.

c)

Seelhoefer
’s

property will transfer to his wife, but the property will not be eligible for the unlimited marital
deduction in
Seelhoefer
’s

estate.

d)

Seelhoefer
’s

property will

transfer to his wife and the property will be eligible for the unlimited marital
deduction in
Seelhoefer
’s

estate.


51)

Which of the following statements regarding joint tenancy with rights of survivorship
is
correct?

a)

Each tenant may bequeath their interest i
n the property at their death.

b)

Joint tenancy with rights of survivorship is the same as community property.

c)

Only spouses can establish joint tenancies.

d)

Each tenant under a joint tenancy with rights of survivorship has an undivided interest in the property.


52)

Which of the following statements regarding community property is not correct?

a)

If one spouse inherits property during the marriage, that property is generally not considered community
property.

b)

Assets acquired by either spouse before marriage generally b
ecome community property upon their marriage.

c)

Community property assets are included in probate.

d)

If one spouse utilizes his paycheck from work performed during the marriage to purchase property, the
property is community property.


53)

At the death of either

partner, a same
-
sex couple would like to ensure that all property, insurance policies, and
retirement plans transfer to the surviving partner. Which of the following will NOT accomplish the couple’s goal?

a)

Each partner is listed as the beneficiary of the o
ther partner’s life insurance policy.

b)

Each partner is listed as the beneficiary of the other partner’s qualified pension plan.

c)

Each partner is a joint tenant in all of the couple’s property owned joint tenancy with rights of survivorship.

d)

State intestacy
laws.


54)

In 2003,
Hobo

and
Hap

Harris
, having been married for
three

years, agree to purchase some real property and title
it joint tenancy with right of survivorship. At the time of the purchase,
Hobo

did not have any cash, so
Hap

paid the
$50,000 purchase
price himself. Over the next five years,
Hap

and
Hobo

allocated the income and expenses of the
property equally, and luckily for them the value of the propert
y increased to $350,000. In 2012

Hap

dies, how much
will his executor include in his federal gross

estate as the value of this real property?

a)

$50,000.

b)

$175,000.

c)

$300,000.

d)

$350,000.


55)

A no contest clause:

a)

requires payments of estate taxes out of specific bequest

b)

is designed to prevent an heir from contesting the will

c)

both a) and b)

d)

neither a) or b)


56)

In 2
012

Mucous

Malburg

loaned his son $10,000 at zero percent interest so he could purchase a watch and arrive at
class on time. He also gave his son $20,000 to pay his tuition at Eastern Illinois University. What is the amount of
tax
able gifts made by
Mucou
s

in 2012
?

a)

0

b)

7,000

c)

8,000

d)

18,000

e)

30,000


57)

R
udolph
Reardanz

has several pieces of property valued at $100,000 that he would like to give away. He wants to
make gifts that sense for both himself and the recipient. He wants to give gifts to his mother,
Rosie
, her only source
of income is Social Security; his brother, Ratface; his daughter, Radish; and to Eastern Illinois University. He has the
following assets:



Intel stock valued at $100,000 and an adjusted basis of $145,000. The stock has a dividend yield
of 0% and is
expected to appreciate at 4%



Ameren stock valued at $100,000 and an adjusted basis of $35,000. The stock has a dividend yield of 4% and
is expected to appreciate at 6%



Google stock valued at $100,000 and an adjusted basis of $55,000. The sto
ck has a dividend yield of 1% and
is expected to appreciate at 11%



Ford bonds valued at $100,000 with an adjusted basis of $98,000. The bond has a coupon of 7% and is not
expected to appreciate.



Real estate valued at $100,000 and an adjusted basis of $88,
000. The real estate is expected to appreciate at
9%.

Which of the above assets should Mr.
Reardanz

keep for himself?

a)

Intel stock

b)

Ameren stock

c)

Google stock

d)

Ford bonds

e)

Real estate


58)

Which of the above assets should Mr.
Reardanz

give to Eastern Illinois Univ
ersity?

a)

Intel stock

b)

Ameren stock

c)

Google stock

d)

Ford bonds

e)

Real estate


59)

Which of the above assets should Mr.
Reardanz

give to Rosie?

a)

Intel stock

b)

Ameren stock

c)

Google stock

d)

Ford bonds

e)

Real estate


60)

Which of the above assets should Mr.
Reardanz

give to Radish?

a)

I
ntel stock

b)

Ameren stock

c)

Google stock

d)

Ford bonds

e)

Real estate


61)

Hobo

Harris

gave her cousin,
Harley
, 2,000 shares of General Motors.
Harris

had an adjusted basis of $20,000 for
the shares and the fair market value at the date of the gift was $60,000. Since
earlier
in
the year
Harris

had given
Harley

a 1989 D
odge Caravan with a value of $13
,000,
Harris

paid gif
t tax of $9,000 on the gift to
Harley
. If
Harley

sells the stock two months later after receiving the gift for $62,000, what is her capital gain/loss?

a)

2,000

b)

6,000

c)

36,000

d)

42,000


62)

Which of the following is not included in the decedent’s gross estate?

a)

Gift tax paid in the last three years

b)

A life insurance policy sold two years ago

c)

Corporate stock transferred to a revocable living trust

d)

A refund of medical
expenses incurred paid two months before death. The refund check was received three
weeks after death.

e)

Property in a QTIP established by a predeceased spouse


63)

Retchen

Reardanz

owns
sixty

percent of the outstanding shares of Mattoon Mop Sales, a family own
ed business.
Her estate could reduce the value of her shares using which of the following valuation discounts?

a)

Minority

b)

Lack of marketability

c)

Both a) and b)

d)

Neither a) or b)


64)

Sam
Seelhoefer

owns an IRA valued at $30,000, a home valued at $32,000 and a
cow

valued at $1,000. Which of
the following assets can be valued using the alternate valuation date?

a)

IRA

b)

Home

c)

Both a) and b)

d)

Neither a) or b)


65)

Which of the following is added to the
taxable estate to determine the tentative tax base?

a)

Gift taxes paid in the
last three years

b)

Administrative expenses

c)

Taxable gifts

d)

Debts of the decedent


66)

The credit for prior transfers applies when:

a)

Taxable gifts were made in the last three years by the decedent

b)

Gift taxes were paid the last three years by the decedent

c)

Estate taxe
s were paid in the last 10 on property included in the estate

d)

Generation skipping tax was paid in the last 10 years


67)

In 2012
, deceden
ts with a taxable estate over $5
,
12
0,000 will pay estate tax equal
of up to __

of their taxable
estate.

a)

15%

b)

35%

c)

45%

d)

55%


68)

In

March 2012
,
Steamboat

Seelhoefer

contributed Microhard stock he had purchased in 1992 for $3,000 to Eastern
Illinois University. At the time of the contribution the stock had a value of $210,000. Mr.
Seelhoefer

s a
djusted
gross income for 2012

is $500,0
00 and his taxable income is $400,000. What is the amount Mr.
Seelhoefer

can
deduct on his 2012

Federal income tax return as a result of this contribution?

a)

3,000

b)

120,000

c)

150,000

d)

200,000

e)

210,000


69)

M
adys
Malburg
, age 72, contributed Microhard stock she had p
urchased in 1995 for $20,000 to a charitable
remainder trust. At the time of the contribution the stock had a value of $200,000. Ms.
Malburg

will receive an
annual annuity payment of $10,000 per year for her 15 year life expectancy then the assets will g
o to Eastern Illinois
University at the time of her death. Ms.
Malburg

s adjusted gross income for 2008

is $400,000 and her taxable
income is $300,000. What is the amount Ms.
Malburg

can deduct on her
2008

Federal income tax return as a result
of this co
ntribution if the Sectio
n 7520 rate is 1.4
%?

a)

65,547

b)

134,453

c)

150,000

d)

200,000


70)

R
om
Reardanz

transferred Microhard stock valued at $30,000
to a revocable trust. His son R
omato is the beneficiary
of the trust.

a)

The stock will be included in
Reardanz
’s probate

estate

b)

The stock will be included in
Reardanz
’s federal gross estate

c)

a) and b)

d)

neither a) or b)

71)

Which of the following clauses in a trust prevents creditors from accessing funds in a trust to satisfy claims against a
trust beneficiary?

a)

disclaimer

b)

remainde
r interest

c)

Crummey

d)

spendthrift

e)

prudent man

72)

Which of the following statements concerning trusts is correct?

a)

Income from a simple trust will be included in the beneficiary’s taxable income

b)

Revocable trusts are included in the decedent’s probate estate

c)

Irrevo
cable trusts are included in the decedent’s taxable estate

d)

Inter vivos trusts are created in a decedent’s will

e)

Life insurance proceeds in an ILIT are subject to estate tax


73)

Which of the following assets should be gifted to Eastern Illinois University

by an

individual over age 70 1/2
?

a)

A Roth IRA with a value of $1
00,000

b)

A home valued at $1
00,000

c)

A Tr
aditional IRA with a value of $1
00,000

d)

A farm with a value of $1
00,000 which was purchased two years ago for $256,000


74)


Which of the following statements regardi
ng a CRAT is not correct?

a)

The CRAT must pay the income beneficiary annually at least five percent of the initial value of the trust

b)

Assets can be added to a CRAT up to five years after is has been established

c)

The assets remaining in the trust at the death

of the income beneficiary will be transferred to the charity

d)

A CRAT should not be established by an individual who is in poor health and is expected to only live a few
months


75)

In 2012
,
Madys

and
Moofy

Malburg

own
Malburg

Moose
, a business with a value of
$4
0
,000,000, as tenants in
common. They have one child
M
abby
, age 23. Which of the following strategies would you recommend for the
Malburg
s?

a)

Madys

and
Moofy

should each have a will that leaves all of their assets to the surviving spouse

b)

Madys

and
Moofy

should each have a will that leaves all of their assets to a bypass trust which provides income
to the surviving spouse

c)

Madys

and
Moofy

should each have a will that leaves all of their assets to
Flabby

d)

Madys

and
Moofy

do not need a will since the business
will not be included in their probate estate

e)

Madys and Moofy should purchase a second to die life insurance policy if they want to their moose to Mabby


76)

Private annuities:

a)

Require payments until the annuitant reaches his life expectancy

b)

Eliminate income ta
x on the sale of the asset

c)

Must be secured with collateral

d)

Increase

the seller’s
probate

estate

e)

Should be used only if the seller is in
poor

health


77)

A surviving spouse can receive:

a)

Income from a bypass trust

b)

Assets from a bypass trust to provide for her he
alth care needs

c)

Both a) and b)

d)

Neither a) or b)


78)

Which of the following individuals has the greatest need for whole life insurance?

a)

R
essie
Reardanz
, age 83, who is married to
Rebar
, age 20. The
Reardanz

s only source of income is a si
ngle
life annuity pur
chased by R
essie that pays the
Reardanz
’s $10,000

per year for the remainder of
Ressie
’s

life.

b)

M
erbert
Malburg
, single, age 42, who owns 100,000 shares of
Malburg

Mops’

stock worth $4
,000,000.

c)

Sam
Seelhoefer
, age 22, who just married Millie
McGuire
, age 47
. They have are both successful attorneys and
have
nine

children
, ages
3 to
12
.

d)

Melly

Malburg
, age
7, a
college

student. She
is a
Cardinals

fan
.


79)

Which of the following statements is correct?

a)

A life insurance policy can be exchanged tax
-
free for
another
life insurance policy

b)

Proceeds from a viatical settlement are
not
taxable to the seller of the policy

c)

Changing the beneficiary on a life insurance policy
creates

a taxable gift

d)

An ILIT should be required to pay estate taxes as a result of the insured’s de
ath


80)

To qualify for surviving spouse filing status, a widow

a)

Must

remarry

b)

Must maintain a home for dependent child

c)

Both a) and b)

d)

Neither a) or b)

81)

Sam
Seelhoefer

owns an IRA valued at $30,000, a home valued at $32,000
,000

and a car valued at $1,000. He di
ed
at a local hospital and incurred $17,000 in medical expenses. The medical expenses should be deducted on his:

a)

Estate tax return

b)

Federal income tax return

c)

Both a) and b)

d)

Neither a) or b)

82)

P
elle
Park

should waive her fee as an executor if:

a)

Th
e

taxable est
ate is $12,456

b)

She is
a Cub
s

fan

c)

She has a marginal income tax rate of 15%

d)

She is
one of 13 heirs


83)

Disclaimers must:

a)

Be made with
in

nine

months of the date of death

b)

Can not s
pecify who will receive the assets

c)

Both a) and b)

d)

Neither a) or b)


84)

Installment pa
yments of estate taxes can be made if:

a)

The deceased owned a
publicly traded stock which

comprises
more than 7
5% of his estate

b)

The
deceased had an estate
of

$2 million

c)

Both a) and b)

d)

Neither a) or b)


85)

Which of the following gifts made by
Putty

Park
, age 94,

is subject to GSTT?

a)

A gift of $18,000 to his
grandmother, Very
Putty
, age 117.

b)

Payment of
education

expenses of $17,000
to
the Collinsville School of Cosmetology
,
for his secretary, Zsa Zsa
Zebra,
age 22, to
study bicep implants

c)

A gift of $
9,000 to his ch
arming wife Buffy, age 21.

d)

A gift of $
1
4
,000 to his

very charming

neighbor FiFi
, age
18
.

e)

A gift of $2
3,000 to his
business partner, Chopper
, age 61
.


86)

What is the maximum amount of gifts
Pauper

Park
, age 83, can make to his
w
ife, Which Wi
tch, age 2
1,

in 2
012

and
pay no GSTT?

a)

13
,000

b)

1,013
,000

c)

5,12
0,000

d)

5,13
3
,000

e)

unlimited


87)

What assets are generally transferred to a dynasty trust?

a)

Family business

b)

Real estate

c)

Retirement accounts

d)

Life insurance


88)

Gerb

Gallaher

believes her

fog machine

business
will appreciate r
apidly

in the future. The current 7520 rate is 2.6%.
Which of the following would be

best suited for accomplishing Gerb
’s objectives?

a)

FLP

b)

QPRT

c)

CRAT

d)

CRUT

e)

GRAT


89)

Which of the following clauses should generally
not
be included in a dynasty trust?

a)

General p
ow
er of appointment

b)

Trust protector

c)

Spendthrift

d)

Distribution


90)

Sally
Seelhoefer

and Mabel
Malburg

both died after suffering heart attacks at a Looters’ restaurant during an
educational expedition sponsored by a prestigious university located in Charleston, Il
linois. The
Coles

County
Coroner was unable to determine if the cause of death was the consumption of $174 of dead chickens at lunch
washed down by beverages made from hops or the sight of scantily clad male waiters in short shorts and low cut
shirts that

caused the students’ heart attacks. During lunch, Ms.
Seelhoefer
, age 87 and a resident of Illinois,
made
an irrevocable transfer of her whole

life insurance policy to Marvin
Malburg
, age 21, a waiter at Looters.

a)

Sally has made a taxable gift to Marvin

b)

T
he life insurance proceeds from the policy will be included in Sally’s taxable estate

c)

Both a) and b)

d)

Neither a) or b)


91)

Ms.
Seelhoefer

had created trust for the benefit of a charity which shelters abandoned llamas. She will receive six
percent of the
annua
l ending

value of the trust

assets
for the remainder of her life. Upon her death the llama
shelter will receive the assets remaining in the trust. This is an example of a:

a)

CLAT

b)

CRAT

c)

CLUT

d)

CRUT

92)

If Ms.
Seelhoefer

wants to make additional contributions to a
charitable trust which pays income to the abandoned
llamas charity for 11 years and then distributes the remaining trust assets to
Seelhoefer
’s boyfriend Lapdog
Harris
,
which type of trust should she have created

if she wanted to maximize her income
?

a)

CLAT

b)

CRAT

c)

CLUT

d)

CRUT

e)

Bypass trust


93)

Ms.
Malburg
, was married to a 18 year
-
old citizen of Russia, Boris
Malburg
, she had recently met on an internet
dating site. To qualify for the marital deduction, Ms.
Malburg

would need to create what type of trust for the ben
efit
of her husband?

a)

CLAT

b)

QTIP

c)

QDOT

d)

Bypass

e)

CRUT


94)

The
Malburg
s were residents of California and had accumulated a
community property estate of $3
,000,000. Just
prior to her death, M
r
s.
Malburg

amended her will to make a specific bequest of $
1,4
00,000 to he
r favorite waiter,
Spanky, at Looters.
Her

will also created a bypass trust to receive property equal to any remaining applicable estate
tax credit after specific bequests. The bypass trust gives income for life to Boris and then leaves the remainder of
the trust to her surviving children. The residual of her estate was left to Boris. What is the marital deduction on
Mabel’s federal estate tax return

in 2012
?

a)

0

b)

$100,000

c)

$600,000

d)

$1,9
00,000

e)

$2,000,000


95)

Edith and Egbert
Edgar
, age 53, and 24, respectively
, are married
and file a joint return for
2012
. Edith earned
$103,000 as an elephant washer at Evansville Elephant Wash, Inc. during the year and contributed $11,000 to the
company’s 401(k) plan. Mrs.
Edgar

owns all of the common stock of Evansville Elep
hant Wash, Inc., valued at $10
million. Egbert owns a dishwa
s
her. The
Edgar
s have come to you for
estate planning advice. In
2012

the
Edgar
s
gave their nephew Elias

$5,000 to open a Roth IRA, $8
,000 to
buy a cow

and paid his
parking fines

of
$2
0,000
dir
ectly to
Eastern Illinois University
. During the year the
Edgar
s
also
paid $30,000 to
Bush League Hospital

for a
brain transplant for Elias’ girlfriend Boom Boom
.

Assuming the
Edgar
s

elect to split gifts, what is the amount of t
he
taxable gift
s

to Elias
and Boom Boom
in
2012
?

a)

0

b)

7
,000

c)

2
4
,000

d)

50
,000

e)

63
,000


96)

Edith is
in
great

health and is expected to live
sixty more

years. Which of the strategies should be considered?

a)

A private annuity sale of Evansville Elephant Wash to the
Edgar
’s son, Edict

b)

Transfer of
the
Edgar
’s home to a QPRT with a 10 year term

c)

Both a) and b)

d)

Neither a) or b)


97)

Which of the following strategies should be considered?

a)

Transferring the company’s stock to a revocable trust

b)

Transferring shares of Evansville Eleph
ant Wash to Egbert valued
at $5
million to Egbert

c)

Both a) and b)

d)

Neither a) or b)


98)

Theodore and Tanna Ticole

Reardanz

w
ere married on December 31, 2005
. It was the
second

marriage for
Theodore, age 22, and the tenth marriage for Tanna Ticole, age 93. At the time of
the
marriage
Theodor
e owned a
bicycle valued at $39

and Tanna Ticole owned 3,000 acres of farm land valued at $15,000,000

jointly with rights of
survivorship with her oldest son Trainwreck;
a home in
Joliet, Illinois

valued at $1,500,000

which was held by Tanna
Ticole
Reardanz

Living Trust
, 10,000 shares of Google valued at $4,000,000 owned
as tenants in common

with her
olde
st son Topless; and a Traditional IRA with a value of $5,200,000. The
Reardanz
s have resided in the home in
Illinois

since their marriage.

Mr.
Re
ardanz

earns $3,000 per year cleaning the t
eeth of elephants at the Joliet

Zoo.
Mrs.
Reardanz

receives $569,000
annual

income from her investments and retirement accounts

and a $89,000 salary
as a consultant to the Chicago Flubs
.
During 2007,
Mr. and
Mrs.

Reardanz

purchased a vacation home in
Mattoon,
Illinois

for $40,000
a
s

tenants by the entirety
.

Theodore has one son, ToTo, age 2 who resides with his mother in
Buffalo, New York. Mrs.
Reardanz

has eight children from her prior marriages ranging in age f
rom six to seventy five
years old. The couple just sign
ed their wills last week. Mr.
Reardanz
’s will leaves all of his assets to his son Toto.
Mrs.
Reardanz
’s will leaves a dishwasher to Mr.
Reardanz

with

the remainder
of her property
to be divided equa
lly
among her surviving children. At the time the farm land was purchased Mrs.
Reardanz

paid the entire purchase
price of $340,000 even though Trainwreck is an equal owner of the land. Which of the following statements is true?

i)

At the time the farm land

was

purchased, Tanna Ticole made a gift of $
340
,000 to Trainwreck

ii)

If Tanna Ticole dies today, the $15,000,000
value of the farm land
would be included in her
probate

estate

iii)

If Trainwreck dies today, the $15,000,000
value of the farm land
would be included

in his taxable estate
unless he can pr
o
ve Tanna Ticole paid the entire purchase price

(a)

i) only

(b)

ii) only

(c)

iii) only

(d)

i), ii) and iii)

(e)

ii) and iii)


99)

The beneficiary of Tanna’s Traditional IRA is her second son, Treetop. He predeceased her three years ago. Th
ere
is no contingent beneficiary. Who will receive the proceeds of the
Tanna’s
Traditional IRA?

a)

Tanna Ticole’s children

b)

Theodore’s child

c)

The state of California

d)

Treetop’s children


100)

The Traditional IRA will be:

a)

Included in Tanna Ticole’s probate estate

b)

Inc
luded in Tanna Ticole’s taxable estate

c)

Both a) and b)

d)

Neither a) or b)


101)

The
dishwasher Tanna Ticole is leaving to her husband Theodore is an example of
:

a)

a spousal bequest

b)

an intestacy transfer

c)

separate property

d)

a specific bequest


102)

If Tanna Ticole predeceas
es Trainwreck, who will receive her interest in the farmland?

a)

Trainwreck

b)

Theodore

c)

all of her surviving children

d)

Theodore and Trainwreck


103)

If Tanna Ticole predeceases Topless, who will receive her shares of Google?

a)

Topless

b)

Theodore

c)

all of her surviving child
ren

d)

Theodore and Topless


104)

Which of the following will be included in Tanna Ticole’s probate estate if she dies today?

i)

the farmland

ii)

her Traditional IRA

iii)

the Google stock

(a)

i) only

(b)

iii) only

(c)

i
i
) and iii)

(d)

i), ii) and iii)


105)

Which of the following will be included

in Tanna Ticole’s taxable estate if she dies today?

i)

the farmland

ii)

her Traditional IRA

iii)

the Google stock

(a)

i) only

(b)

iii) only

(c)

i) and iii)

(d)

i), ii) and iii)


106)

If the
Reardanz
s gift the vacation home to Tanna Ticole’s cha
rming ex
-
husband Termite in
2012

when the ho
me has
a value of $30,000, how much income is taxable i
f Term
ite sells the home in 2012

for $55,000?

a)

$25,000 of capital gain

b)

$25,000 of ordinary income

c)

no taxable income

d)

$15,000 of capital gain

e)

$15,000 of ordinary income


107)

Assume the vacation home has a val
ue of $100,000 at the time of Tanna Ticole’s death. If the home is sold for
$102,000 shortly after her death, how much income is taxable from this sale?

a)

$3
2,000 of capital gain

b)

$6
2,000 of ordinary income

c)

no taxable income

d)

$62
,000 of capital gain

e)

$2,000 of

capital gain


108)

Saxine
Strache
, age 57, contributed $4,000 to a Roth IRA on March 3, 2008, for the 2007 tax year

when she was 57
.
Assuming no further contributions are made, when is the first year
Strache

could take a distribution of $3,000 from
her Roth I
RA and pay no ordinary income tax or penalty?

a)

2008

b)

2010

c)

2011

d)

2012

e)

2013


109)

P
acey
Park
, single and age 73, had the following items of income:

Rent Income: $693,200

Bonus: $600

Alimony: $1,000

Wages: $3,400

Interest Income: :$389,700

Capital Loss: $
-
100

What
is the maximum contribution
Park

can make to
a Roth IRA for 202
1
?

a)

0

b)

$3,400

c)

$4,000

d)

$4,400

e)

$6,000


110)

Not So
Putty

Park
, a single 28 year old, earned $100,000 as

a cocktail waitress during 2012
. She contributes
$11,000 to he
r employer’s 401(k) plan in 2012
. W
hat is the amount of Social Security and Medicare taxes that will
be

w
ithheld from her wages in 2012
?

a)

$
5,450

b)

$6,809

c)

$7,650

d)

$12,400

e)

$15,300


111)

Mabel
Malburg
, age 55, is employed by
Seelhoefer

Saddle

Company as a tir
e repair specialist. He earns $
82,000 per
ye
ar and owns
four percent of the
stock of the company.
Malburg

received an allocation of $39,000 to his
employer
-
provided profit sharing plan for the year. If the NHC (peon) employees contributed 4.5% to the company’s
401(k) plan, what is the maximum amoun
t
Malburg

can defer to

his 401(k) account for the 2012

plan year?

a)

$11
,000

b)

$11,830.

c)

$16,380

d)

$
17,000
.

e)

$22,5
00.




112)

Mildred
Malburg
, age 5
5, is employed by
Seelhoefer

Saddle

Company as a tire repair specialist. She earns $282,000
per year and owns no stock of
the company.
Malburg

received an allocation of $9,000 to her employer
-
provided
profit sharing plan for the year. If the NHC (peon) employees contributed 4.5% to the company’s 401(k) plan, what
is the maximum amount
Malburg

can defer to

his 401(k) account
for the 2012

plan year?

a)

$15,925

b)

$16,
250

c)

$17,000

d)

$18,330

e)

$22,5
00.


113)

Oliver

Odom
, a single 29 year old, earned $427,500 as a cocktail
waiter

during 2012
.
His

employer does not sponsor
a qualified plan. What is the maximum
deductible

IRA contribution
Odom

can

make during 2012

to a Traditional
IRA assuming
his

only income was
his

salary?

a)

$0.

b)

$1,000

c)

$4,000

d)

$5,000.

e)

$6,000


114)

Which of the following statements are true?

i)

The federal government can only invest
Medicare

funds in corporate and municipal bonds.

ii)

Medicare i
s currently expected to exhaust its funds before Social Security will.

iii)

Social Security benefits are forfeited by individuals who commit a crime

iv)

Medicare pays for the cost of long
-
term care in a nursing home for individuals with no assets

(a)

i) and iii).

(b)

ii)
and iv).`

(c)

ii) only

(d)

iii) only

(e)

iv) only


115)

Which of the following statements are true?

i)

Individuals who retire at age 62 are eligible for Medicare Part A coverage if the
y earn less than $14,160 in
2012

ii)

Individuals pay a monthly premium for Medicare Part B cover
age.

iii)

Medicare Part B pays 100% of the cost of medical equipment such as scooters

(a)

i) and iii).

(b)

ii) and iii).

(c)

ii) only

(d)

iii) only

(e)

none of the above


116)

Mad E.
Malburg

individually owns 1,000 shares of Jones Soda stock she purchased for $
617

in 2002. While drivi
ng
her scooter down the frozen food aisle at Wal
-
Mart Ms.
Malburg

checks the value of her portfolio on her smart
phone and discovers the value of her Jones Soda stock has
risen to $89,500
. Ms.
Malburg

suffers a heart attack and
drives her scooter head on
into a frozen food case and she is fatally crushed by falling frozen lima beans. The will of
Ms.
Malburg

leaves all of her assets to her cousin, Wilmer
Gallaher
.
After a front page article in the
Chucktown
Times Blurrier

discloses that Jones Soda cherry
surprise soda is manufactured using pureed grass carp from the
Embarrass River,
Mr.
Gallaher

sells the 1,000 shares of Jones Soda
six months after
Malburg
’s death

for $657. Mr.
Gallaher

will report:

a)

A long
-
term capital gain of $40

b)

A short
-
term capital gai
n of $40

c)

A long
-
term capital loss of $88,843

subject to a $3,000 annual limitation

d)

A short
-
term capital loss of $88,843

subject to a $3,000 annual limitation

e)

Neither a capital gain or loss


117)

Honey

Honiotes

owns
a brick collection

valued at $30,000
,000
, a ho
me valued at $32,000 and a cow valued at
$1,000.

Her husband,
Horseface
, owns a

toaster oven valued at $3
.
Horseface

is crushed by
Honey
’s brick
collection when he sneezes and 4.2 tons of bricks cascade down on him. If his will,
Horseface

left his toas
ter oven
to
Honey
.
Which of the following
statements are true?

a)

If
Horseface

files an estate tax return,
Honey

can use
Horseface

unused $5
,119,997

exemption

b)

Honey

and
Horseface

should purchase a second to die insurance policy if they would like to leave th
e brick
collection to their son
Hopper

c)

Both a) and b)

d)

Neither a) or b)




118)

Which of the following statements regarding variable annuities are true?

a)

the investors funds are placed in subaccounts

b)

the investor can select allocate his funds among different ass
et classes in the sub accounts

c)

both a) and b)

d)

neither a) or b)


119)

Which of the following statements regarding fixed annuities are true?

a)

the term certain feature of fixed annuities guarantees the investor a minimum number of payments

b)

withdrawals from a fixed
annuity prior to age 59 ½ are subject to a 10% early withdrawal penalty

c)

both a) and b)

d)

neither a) or b)


120)

Roger Reardanz, age 84, owns 13,000,000 shares of Apple stock. Her husband, Klepto, age 21, owns a can opener.
They have four children, ages 2
-

15.

They both have wills which leave all of their assets to their surviving spouse if
they survive the decedent spouse by two months. Which of the following statements is true?

a)

If Roger dies in 2012, Klepto can use Roger’s unused unified credit on her estate

tax return if he dies later in
2012.

b)

If Klepto dies before Roger, Roger should disclaim the can opener.

c)

both a) and b)

d)

neither a) or b)


121)

Claude

and
Claudia

Centeno
, age 53, and 24, respectively, are married and file a joint return for
2012
.
Mrs. Centeno
earned $250,000 as a cow

washer at
Collinsville

Cow

Wash, Inc. during th
e year and contributed $6
,000 to
a
Traditional IRA
. Mrs.
Centeno

owns all of the common stock of
Collinsville

Cow

Wash, Inc., valued at $10
0

million.
Claude

owns a
lawn mower
. The
C
enteno
s have come to you for estate planning advice. In
2012

the
Centeno
s
paid

$20,000 to Eastern Illinois University
for their nephew Clodhooper’s room and board
and
gave Clodhopper

$40,000
to pay his
tuition at Eastern Illinois University
. During the y
ear the
Centeno
s paid $30,000 to
Dr. Chainsaw Chu

for
the
medical bills of
Clodhopper’s
girl friend
, Chopper
. Assuming the
Centeno
s elect to split gifts, what is the amount
of the taxable gift
s

to
Clodhopper

in
2012
?

a)

14,000

b)

27,000

c)

34,000

d)

44,000

e)

47,000


122)

Cl
audia

is
in great

health and is expected to live
forty

years. Which of the strategies should be considered?

a)

A private annuity sale of
Collinsville

Cow

Wash to the
Centeno
’s son,
Chewy

b)

Transfer of the
Centeno
’s home to a QPRT with a 10 year term

c)

Both a) an
d b)

d)

Neither a) or b)


123)

What ownership method would allow
Claudia

to continue to control
Collinsville

Cow

Wash while transferring her
ownership interest in the company to her children at reduced valuations?

a)

A QPRT

b)

A QTIP

c)

A FLP

d)

A GRAT with a 10 year term


124)

Yo
u recommend Claudia establish a GRAT with a
three

year term and transfer company stock valued at $2
0
,000,000
to the trust since the current Section 7520 rate is 1.4%. Claudia wi
ll receive annual payments of $6,850,00
0.
Claudia’s son Cabbage will be the
beneficiary of the trust. What is the amount of the taxable gift when Claudia
transfers the stock to the trust?

a)

0

b)

12,251

c)

550,000

d)

6,850,000

e)

19,987,749


125)

Unfortunately

Claudia

dies
before you can set up the GRAT

and her only asset
s are

the stock of the compa
ny, which
she leaves
to her husband Claude
and her IRA, valued at $1
0
,0
00,000.
Chewy

is the primary beneficiary and
Claude

is the contingent beneficiary for the IRA. How much Federal estate tax will be payable in
2012 as a result of
Claudia’s death
?

a)

0

b)

$1
,708
,000

c)

$1,750,000

d)

$3,500,000

e)

$3,85
0,000