QUESTION: 85

Which of the following statements concerning state death tax exemptions and tax rates for classes of estate beneficiaries is (are) correct?
1. Exemptions are determined by the closeness of the beneficiary's blood relationship to the decedent.
2. Closest relatives receive the lowest tax rates and lowest exemption amounts.

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

Answer(s): A

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QUESTION: 86

A father plans to create a trust for the benefit of his 22-year-old son and wishes to take advantage of the gift tax annual exclusion. He has named a bank as trustee. Which of the following trust provisions would cause the gifts to be ineligible to qualify for the gift tax annual exclusion?
1. The trust income is to be paid to the son or accumulated at the discretion of the trustee.
2. The income is to be accumulated until the son reaches age 32 when all accumulated income and principal are to be distributed to him.

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

Answer(s): B

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QUESTION: 87

Income earned but unpaid at the time of a decedent's death is deemed to be income in respect of a decedent (IRD). All the following statements concerning IRD are correct EXCEPT:

The income must be reported on the decedent's final federal income tax return.
IRD includes sales commissions earned prior to the decedent's death and paid to the estate according to the intestacy laws.
The income is taxable to the person or entity receiving it.
The income may be included on both the estate tax return and the estate income tax return with a corresponding deduction.

Answer(s): A

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QUESTION: 88

Which of the following statements concerning a grantor-retained annuity trust (GRAT) is correct?

The transfer of property to the trust becomes a completed gift for gift tax purposes only at the termination of the grantor's retained interest term.
The trust is used as a device for shifting income tax on the current trust income to there mainder person(s).
If the grantor dies before the retained interest term ends, the estate tax benefits are reduced.
The grantor retains control of the trust property until revocation or death.

Answer(s): C

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