Multiple Choice Questions
1. Which of the following is a specific legacy?
a. The gift of all remaining estate property to a charity.
b. The gift of $44,000 cash from a specified source.
c. The gift of $44,000 cash.
d. The gift of 1,000 shares of stock in IBM.

2. A will has the following statement: "I leave $20,000 cash from my savings account in the Central Fidelity Bank to my sister, Angela." This gift is an example of
a. A residual legacy.
b. A general legacy.
c. A demonstrative legacy.
d. A specific legacy.

3. What is the objective of the process of abatement?
a. To give legal structure to the reductions that must be made if an estate has insufficient assets to satisfy all legacies.
b. To ensure that all property distributions take place in a timely manner.
c. To provide adequate compensation for the estate executor and any appraisers or other experts that must be hired.
d. To ensure that all legacies are distributed to the appropriate party as specified by the decedent's will or state laws.

4. For estate tax purposes, what date is used for valuation purposes?
a. Property is always valued at the date of death.
b. Property is always valued at the date of distribution.
c. Property is valued at the date of death unless the alternate date, which is the date of distribution or six months after death, whichever comes first, is selected.
d. Property is valued at the date of death although a reduction is allowed if the value declines within one year of death.

5. Which of the following is true concerning the Economic Growth and Tax Relief Reconciliation Act of 2001?
a. This tax law leads to the immediate elimination of the federal estate tax.
b. This tax law leads to the immediate elimination of the federal gift tax.
c. This tax law provides for a $3.5 million tax-free exemption for estates created in 2009.
d. This tax law leads to the immediate elimination of the generation-skipping tax.

6. In computing federal estate taxes, deductions from an estate's value are allowed for all of the following except
a. Charitable bequests.
b. Losses on the disposal of investments.
c. Funeral expenses.
d. Debts of the decedent.

7. The following individuals died in 2009. The estate of John Lexington has a taxable value of $2,590,000. The estate of Dorothy Alexander has a taxable value of $2.9 million. The estate of Scotty Fitzgerald has a taxable value of $4.6 million. None of these individuals made any taxable gifts during their lifetimes. Which of the following statements is true?
a. Only Fitzgerald's estate will have to pay federal estate taxes.
b. All three of the estates will have to pay federal estate taxes.
c. None of these estates is large enough to necessitate the payment of estate taxes.
d. Only the estates of Alexander and Fitzgerald are large enough to necessitate the payment of estate taxes.

8. Sally Anne Williams died on January 1, 2009. All of her property was conveyed to several relatives on April 1, 2009. For federal estate tax purposes, the executor chose the alternate valuation date. On what date was the value of the property determined?
a. January 1, 2009.
b. April 1, 2009.
c. July 1, 2009.
d. December 31, 2009.

9. M. Wilson Waltman died on January 1, 2009. All of his property was conveyed to beneficiaries on October 1, 2009. For federal estate tax purposes, the executor chose the alternate valuation date. On what date was the value of the property determined?
a. January 1, 2009.
b. July 1, 2009.
c. October 1, 2009.
d. December 31, 2009.

10. Which of the following is not true concerning gift taxes?
a. Gift taxes will not be abolished but a lifetime exclusion of $1 million is created.
b. The Economic Growth and Tax Relief Reconciliation Act of 2001 will eventually eliminate the federal gift tax.
c. Historically, gift taxes and estate taxes have been linked through a unified transfer credit.
d. Gift taxes are different from generation-skipping taxes.