QUESTION: 61

Ignoring the annual per-donee exclusion, all the following transfers are gifts for federal gift tax purposes EXCEPT:

An individual gratuitously performs valuable services for the benefit of a close friend.
A grandmother reimburses her grandson for his college tuition costs.
A creditor cancels the promissory note of a friend who recently became unemployed.
A father lends his daughter a large sum of money interest free for a period of 2 years.

Answer(s): A

A father wants to accumulate funds for his 12-year-old son's college education. On the advice of his attorney, the father establishes an IRC Section 2503(c) trust and funds it with annual gifts. All the following statements concerning this arrangement are correct EXCEPT:

In the event of the son's death prior to age 21, trust assets must either be payable to the son's estate or be subject to a general power of appointment held by the son.
The father's annual gift tax exclusion must be reduced by any amount used to pay college tuition costs.
The trust must be irrevocable.
Any accumulated income and all trust principal must be available for distribution to the son when he attains age 21.

Answer(s): B

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QUESTION: 63

The executor of an estate has a choice of waiving the executor's fee. Factors that should be considered by the executor in making this choice include all the following EXCEPT:

the estate tax bracket of the estate
the income tax brackets of the other beneficiaries
whether the executor is otherwise a beneficiary of the estate
the income tax bracket of the executor

Answer(s): B

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QUESTION: 64

All the following statements concerning an entity-purchase buy-sell agreement for a partnership are correct EXCEPT:

The partnership, in effect, liquidates the interest held by the decedent-partner's estate.
The partnership makes payments to the decedent-partner's estate to liquidate the partnership interest held by the estate.
It is the surviving partners who purchase the decedent's business interest so that the partnership can afford to pay the decedent's estate.
Both the partners and the partnership are parties to the agreement that provides for business continuation.

Answer(s): C

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