QUESTION: 105

On January 1, 2004 a father gave his daughter a $50,000 straight (ordinary) life insurance policy on his life. Premiums are paid annually. The pertinent facts about the policy are:

Date of issue: July 1, 1992
* Premium paid on July 1, 2003 $800
* Terminal reserve on July 1, 2003 5,000
* Terminal reserve on July 1, 2004 6,000

What is the value of the policy for federal gift tax purposes?

$5,800
$50,000
$5,900
$5,400

Answer(s): C

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QUESTION: 106

Which of the following factors is (are) used to make a choice between having an entity-purchase or a cross-purchase partnership buy-sell agreement?
1. The number of partners
2. The divergence of the partners' business knowledge and skills

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

Answer(s): D

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QUESTION: 107

A man is planning to establish and fund an irrevocable trust for the benefit of his two sons, ages 19 and 22, and plans to give the trustee power to sprinkle trust income. From the standpoint of providing federal income, gift, and estate tax savings, which of the following would be a suitable trustee?

1. The grantor of the trust
2. The grantor's 22-year-old son

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

Answer(s): A

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QUESTION: 108

Which of the following life insurance settlement options will qualify for the federal estate tax marital deduction?
1. Proceeds left to the surviving spouse under the interest option, with interest payable to the surviving spouse who has the unrestricted right to withdraw proceeds and with any proceeds not withdrawn payable equally to her children per stirpes
2. Proceeds left to the surviving spouse under an installment option, with any installments remaining at her death to be commuted and paid to her estate

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

Answer(s): A

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QUESTION: 105

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QUESTION: 108

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