multiple choice - finc real estate reserved for Evans_J

Caribon Cruise Tours has a traditional 401(k) plan for employees. Last year, payroll for employees covered under the plan was $500,000, and employee elective deferrals amounted to $100,000. Which of the following is true? Question 11 options:

A) Caribon Cruise Tours can deduct up to $225,000 for federal income tax purposes

B) Caribon Cruise Tours can deduct no more than $125,000 for federal income tax purposes

C) employees paid income and payroll taxes on the amounts they chose to defer

D) a and c

E) a and b

Four years ago,  George inherited some money and put some of the money in a new Roth IRA. He has been renting all his life but has recently found a home he wants to buy. George can make a penalty-free withdrawal of $10,000 from his Roth IRA to help complete the purchase of his first home. Question 14 options:

A) True

B) False

Jacob Ladder, age 30, opened the Camera International 5 years ago. The company has five employees ranging in age from 25 to 42. Earnings have fluctuated. Profits have been made only in the last two years. Jacob should Question 20 options:

A) not have a defined benefit plan because it is designed for older business owners

B) have a defined benefit plan because it will maximize April’s tax deduction

C) not have a defined benefit plan because there are a large number of years until the owner or employees retire

D) have a defined benefit plan because the owner can get $1,500 tax credit for establishing a new retirement plan

E) not establish a defined benefit plan because it is not likely Jacob can meet the annual funding requirements


 Which of the following is/are always true about wills? I. A will transfers all of the decedent’s assets. II. A will only takes effect when the decedent dies. III. A will names an Administrator for the estate. Question 27 options:

A) I and II only

B) II and III only

C) II only

D) I, II and III

The Kiddie Tax applies to Question 28 options:

A) All earned income of a child under the age of 18.

B) All earned income of a child under the age of 24 and a full-time student.

C) All unearned income of a child under the age of 18.

D) The net unearned income of a child under the age of 24 and a full-time student.

Assets transferring under a “pour-over” will into a living trust are not subject to the probate process. Question 29 options:

True

False

Decedent dies owning the following assets: $250,000 real estate owned equally as a tenancy-in-common with his brother; $500,000 residence owned jointly with right-of-survivorship with his wife; $250,000 IRA payable ½ to spouse, ½ to kids; $1 million life insurance policy payable in equal shares to wife, kids, the decedent’s college. What is the value of the decedent’s gross estate? Question 30 options:

A) $ 125,000

B) $ 917,000

C) $1,041,000

D) $1,625,000


 Alice owns 1,000 shares of XLNT stock that she wants her daughter Mary to receive at her death. Should Mary not survive Alice, Alice wants the stock to pass to her younger brother, Mitchell. Which will provision would best accomplish Alice’s objective? Question 31 options:

A) A tax clause

B) A transfer clause

C) A devise

D) A specific bequest


 Amber wants to be sure that her property passes only to family members at her death. To accomplish this objective, in her will, she should give her husband Tom Question 32 options:

A) Testamentary power

B) General power of appointment

C) Generation linking power of appointment

D) Limited power of appointment


 
 With respect to disclaimers, which of the following is true? Question 33 options:

A) A disclaimer of a property interest, or a power, is treated as a gift for gift tax purposes.

B) A disclaimed interest in property is considered to be a transfer by a disclaimant/decedent for estate tax purposes and will be included in his estate at death as a transfer with a retained life estate.

C) Any income received on disclaimed property will not be chargeable to the person in whose favor the property was disclaimed.

D) If property is disclaimed by a person in favor of a surviving spouse or charity, the marital or charitable deduction will be permitted provided the property would otherwise qualify for these deductions.


 An insured under a life insurance policy is considered to be enjoying the economic benefits of that policy if the insured has the right to I. Name a policy beneficiary II. Surrender a policy III. Borrow the cash value of the policy What is the best definition of probate assets? Question 34 options:

A) An asset which must be owned by the decedent on the date of death

B) An asset which is included in the decedent’s gross estate.

C) An asset which transfers under the provisions of the decedent’s will.

D) The Executor determines what is considered a probate asset.

Jim died with a gross estate equal to $3,000,000. In his will, he provided for the following outright transfers: $1,000,000 to his wife; $1,000,000 to his daughter; and $1,000,000 to charity. What is Jim's taxable estate for estate tax purposes? Question 35 options:

A) $0

B) $1,000,000

C) $2,000,000

D) $3,000,000

An insured under a life insurance policy is considered to be enjoying the economic benefits of that policy if the insured has the right to I. Name a policy beneficiary II. Surrender a policy III. Borrow the cash value of the policy Question 36 options:

A) I

B) I and II

C) I and III

D) I, II, and III

Which of the following meets the requirements of a gift subject to the gift tax? Question 37 options:

A) A donor writes a check for $20,000 payable to the donee and specifies how, when, and in what way the donee is to use the money

B) A donor writes a check for $20,000 payable to the donee. The donee receives the check and accidentally tears it up.

C) A donor writes a check for $20,000 payable to the donee but forgets to mail it.

D) A donor misplaces a check. The donee finds the check and endorses to himself for $20,000.

Which of the following is an example of a direct skip? Question 38 options:

A) A divorced person transfers property to his or her former spouse

B) A person gives a plot of land to his or her nephew

C) A grandmother makes a transfer to a trust benefiting her great-grandchildren

D) A father gives stock to his son and grandson

In general, a grantor trust: Question 39 options:

A) Subjects the grantor of the trust to income tax liability, as owner of the trust.

B) Protects the grantor by not taxing him/her on the income of the trust.

C) Protects the trust from any and all income tax liability.

D) Subjects the trust beneficiaries to income tax liability.

Harry Jenkins, a widower, owned 10 acres of land that he purchased in 1994 for $5,000 per acre. On the date of Harry's death, June 30, 2011, the land was valued at $10,000 per acre. Harry's only child is Elizabeth. If after inheriting the land, Elizabeth sells the property in 2013 for $200,000, which of the following statements correctly summarizes the potential federal tax consequences to Elizabeth? Question 40 options:

A) Elizabeth's gain will be zero because she is Harry's sole heir.

B) Elizabeth's gain will be $100,000.

C) Elizabeth will be required to recognize a gain of $200,000 even though she is Harry's sole heir.

D) Elizabeth's gain will be $150,000

The disclaimer of an IRA by the surviving spouse can allow tax-deferred growth of the underlying assets over a much longer period of time because: Question 41 options:

A) the minimum required distributions will be based on the life expectancies of the contingent beneficiaries likely to be much younger than the surviving spouse.

B) this technique avoids the generation-skiping transfer tax.

C) younger beneficiaries are often taxed at lower rates than the survising spouse.

D) the assets may be spread between more benficiaries.

In a community property state I. Half of the property belongs to the surviving spouse and is typically not subject to the “pour over” provisions of the will II. Property held with a spouse in joint tenancy with right of survivorship will pass to the surviving spouse, regardless of provisions in decedent’s will III. Couples do not have separate property Question 42 options: A) I and IIB) I and IIIC) II and IIID) I, II, and III The principal advantage of using a GRAT or GRUT is to: Question 43 options: A) Remove property from the grantor's estate if the grantor dies during the trust term.B) Provide for discretionary distributions during the trust term.C) Make gifts which qualify for the annual exclusionD) Obtain a discounted value for the remainder interest. The following statement best describes the primary characteristic of what type of life insurance? This type of life insurance resembles a traditional whole life policy with two major distinctions: 1) Neither the death benefit nor the surrender value payable during lfie are guaranteed. 2)The policy-owner, not the insurance company allocates the premium, after certain deductions are made to a sub-account held by the insurance company. Question 44 options: A) Survivorship insurance.B) Endowment insurance.C) Universal life insurance.D) Variable life insurance.

Colby is actively involved with supporting his alma mater. In January, Colby contributed $11,000 of highly appreciated securities, $20,000 cash to an Endowment Appeal, and 100 hours of his time normally billed at $200/hour. If no further charitable contributions are made for the rest of the year, what is the total value of Colby’s charitable contributions? Question 45 options: A) $20,000B) $31,000C) $51,000D) Cannot determine since we have no information on Colby’s AGIWhich of the following is not a valuation discount allowable for limited partnership interests? Question 46 options: A) Lack of marketability.B) Time value of money.C) Built in capital gains.D) Lack of control.Jake and Tom are domestic partners in committed relationship. They purchased a home that cost $250,000. Jake contributed $100,000 and Tom contributed $150,000 to the purchase. They took title as tenants-in-common. Ten years later, Tom dies. At that time, the home has appreciated in value to $325,000. What is the amount that will be included in Tom’s estate for estate tax purposes? Question 47 options: A) $0B) $150,000C) $195,000D) $325,000Unmarried couples may use of all of the following tax advantages except: Question 48 options: A) Annual exclusion gifts.B) Split gifts.C) Bypass trusts.D) Payment of educational expenses.For gift and estate tax purposes, the present value of future payments determines the fair market value of all but which of the following: Question 49 options: A) A private annuity.B) A life estate.C) A remainder interest.D) A listed stock.A joint return may be filed for a decedent and surviving spouse for the year of death even if the surviving spouse remarries before the end of the year. Question 50 options: A) TrueB) False