QUESTION: 25

Ignoring the annual per-donee exclusion, which of the following transfers is a gift for federal gift tax purposes?

A creditor cancels the promissory note of a recently unemployed friend as a charitable gesture.
A father promises to buy his daughter a condominium when she finishes college.
A grandmother pays her grandson's $30,000 tuition at an Ivy League university.
An individual gratuitously performs valuable services for the benefit of a close friend.

Answer(s): A

QUESTION: 26

Which of the following statements concerning ownership of property in the form of a joint tenancy with right of survivorship is correct?

This form of ownership is limited to real property.
Nonqualified joint tenants may have unequal interests in the property.
Upon the death of a joint tenant, the surviving joint tenant receives the decedent's interest by operation of law.
Qualified joint tenancies cannot be severed without mutual consent.

Answer(s): C

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Which of the following statements concerning the methods of valuing a closely held business for federal estate tax purposes is (are) correct?

1. The capitalization-of-adjusted-earnings method uses a capitalization rate that varies inversely with the degree of risk and rate of return.
2. The adjusted-book value method involves adjusting the asset components of a business to an approximate fair market value for each component.

Both 1 and 2
1 only
2 only
Neither 1 nor 2

Answer(s): A

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QUESTION: 28

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.

2 only
Neither 1 nor 2
Both 1 and 2
1 only

Answer(s): A

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QUESTION: 25

QUESTION: 26

QUESTION: 27

QUESTION: 28

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