QUESTION: 13

Many trust instruments provide for the removal of the original trustee. All the following are valid reasons for removal of a trustee EXCEPT:

A shift in trust situs is desirable because of changes in law.
The beneficiary is not able to get along with the present corporate trustee.
The beneficiary has moved his or her residence to a distant state.
The beneficiary has been successful with investments and wants to manage the trust assets.

Answer(s): D

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A father bought stock for $100,000 and gave it to his son when it was worth $300,000. The father paid no gift tax on the transfer. When the son sold the property 2 years after the gift, his income tax basis was

$100,000
0
$300,000
$200,000

Answer(s): A

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QUESTION: 15

A father deeded a house as a gift to his daughter in 1990 but retained the right to live in it until his death. He died this year while still living in the house. The following are relevant facts: The father bought the property in 1980 for $130,000. The fair market value of the property when the gift was made in 1990 was $150,000. The father filed a timely gift tax return but paid no gift tax because of the applicable credit amount. The fair market value of the property at the father's death was $220,000. The daughter sold the property 3 months after her father's death for $220,000. She had a gain of

$120,000
0
$140,000
$220,000

Answer(s): B

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QUESTION: 16

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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