American College Fundamentals of Estate Planning test Sample Questions:

1. A married man is the sole owner of a small business with an estate tax value of $500,000. In addition, he and his wife own an office building as joint tenants with right of survivorship which they purchased five years ago. The building has an estate tax value of $1,500,000. They are considering dissolving the joint tenancy and retitling the building in the name of the husband as sole owner. All the following statements concerning this action are correct EXCEPT:

A) If the husband dies first, the probate costs of his estate could be increased.
B) At the husband's death, his heirs would get a fully stepped-up tax basis for the property.
C) At the husband's death, it would be easier to qualify his estate for an IRC Section 303 stock redemption of his business interest.
D) If the husband dies first and leaves the office building outright to his wife, there would be no federal estate tax attributed to its inclusion in his gross estate.

2. A married man is the sole owner of a small business with an estate tax value of $500,000. In addition, he and his wife own an office building as joint tenants with right of survivorship which they purchased five years ago. The building has an estate tax value of $1,500,000. They are considering dissolving the joint tenancy and retitling the building in the name of the husband as sole owner. Which of the following statements concerning this action is (are) correct?
1.If the husband dies first, it would be easier to qualify his estate for a Section 303 redemption of his business interest.
2.If the husband dies first, the probate costs of his estate could be increased.

A) Both 1 and 2
B) 2 only
C) 1 only
D) Neither 1 nor 2

3. Which of the following statements concerning pooled-income funds is (are) correct?
1.A pooled income fund is similar to a mutual fund maintained by a qualified charity.
2.It is an irrevocable arrangement in which the remainder interest passes to charity.

A) Both 1 and 2
B) 2 only
C) 1 only
D) Neither 1 nor 2

4. Which of the following statements concerning the so-called "kiddie-tax" on unearned income of children under age 14 is (are) correct?
1.The rules apply to earned income of the children.
2.The rules apply to trust income received by a child under age 14 only if the trust was established by the child's parents.

A) Both 1 and 2
B) 2 only
C) 1 only
D) Neither 1 nor 2

5. Which of the following transactions is a taxable gift for federal gift tax purposes?

A) A father made a deposit of $100,000 into a bank account titled jointly with his son, and the son has not yet made any withdrawals.
B) A mother purchased listed common stocks titling them in joint names with her daughter and the stocks have not yet been sold.
C) A man deeded real estate to his sister but did not record the deed nor did he deliver the deed to his sister.
D) A grandmother purchased a U.S. savings bond that is registered as payable to her and her two grandchildren and the bond has not yet been surrendered for cash.

Solutions: