1

1. When a parent makes a loan to a child and does not charge interest, there is no income or gift tax consequence if the child pays back the principal.

   True

   False

5 points

QUESTION 2

1. In a sale-leaseback, if the sale price is less than the FMV of the property, the lessor is making a gift of the difference to the lessee.

   True

   False

5 points

QUESTION 3

1. When an installment sale is based on the full FMV of the property transferred, the seller has not made a gift to the buyer of the property.

   True

   False

5 points

QUESTION 4

1. SCINs and Private Annuities share which of the following similarities:

   1. Both spread out the payment of the income tax liability on the sale of property.
   2. Both require that the present value of the unpaid payments be included in the transferors gross estate.
   3. Both require that a premium be attached to the payments.

   I

   II

   III

   I and III

5 points

QUESTION 5

1. ForQuestions 5and 6:

   John owns real estate with a fair market value of$1million in which he has a basis of$250,000.In2008,John sold the property to his son,Junior,for$1million,subject to an installment note.Junior must pay the$1million plus interest over5years.The note providesUnless sooner discharged,upon Johns death,all amounts due under this note shall be deemed to be extinguished and treated as paid.

   Which of the following statements is true regarding a SCIN?

   If John dies prior to receiving all payments,the present value of the installment payments not made will be included in John's gross estate.

   The unpaid installment payments are are IRD.

   No premium will be attached to the note.

   If John dies before Junior has paid off the note,Junior will not have to make any further payments.

5 points

QUESTION 6

1. In 2015, Junior sells the property for $2 million. What is Juniors gain on the sale of the real estate?

   $750,000

   $1million

   $1,750,000

   Cannot be determined

5 points

QUESTION 7

1. Which of the following is not true with respect to bargain sales?

   The donor has made a taxable gift of the difference between the sale price and the FMV of the asset to the beneficiary.

   The donor will not realize income or exceed capital gains.

   If the sale is made to a charity,the donor may receive an income tax charitable deduction in the amount of the difference between the sale price and the FMV of the asset.

   The annual exclusion is available to offset the taxable value of the gift.

5 points

QUESTION 8

1. Susan owns a rapidly appreciating asset she wants to remove from her estate. However, Susan has already utilized her gift tax unified credit. Therefore, she creates a defective trust to which she sells her appreciating asset in exchange for a 15 year installment note. She also transfers cash into the trust. Susans basis in the assets is $100,000. She sells the property to the trust for $1 million. What is the income tax ramification associated with this sale?

   No taxable gain on the sale sinceSusan and the trust are the same for income tax purposes

   .Susan will recognize gain of$900,000.

   The trustwill recognize gain of$900,000.

   The trust and the trust beneficiaries will share the recognition of the900,000other gain based upon the DNI calculation.

5 points

QUESTION 9

1. Which of the following is not a tax consequence associated with a defective trust?

   The income taxes shared by the trust and the trust beneficiaries

   .Thegrantoris subject to income tax.

   For gift tax purposes,a gift into this trust is complete.

   The trust assets are removed from the grantor's estate.

5 points

QUESTION 10

1. Cameron owns all of the common stock of Diaz Industries valued at $2.5 million. Cameron is 60 and has two children, Lucy and Drew. Lucy is involved in the business, but Drew is not. Cameron wants to phase-out of the business and wants Lucy to take on more responsibility. Cameron needs some income to support her living expenses. Cameron has already used her unified credit and does not want to pay a gift tax. Which of the following options is the most appropriate strategy to allow Cameron to transfer the business interest to Lucy?

   An installment sale of Cameron stock to Lucy.

   A bargain sale of the stock to Lucy.

   A sale-leaseback of the company offices to the corporation.

   A private annuity between Cameron and Drew.

5 points

QUESTION 11

1. . Only an individual can act as the general partner in a family limited partnership.

   True

   False

5 points

QUESTION 12

1. A limited liability company offers greater creditor protection than a family limited partnership.

   True

   False

5 points

QUESTION 13

1. The general partner in an FLP may transfer all of his assets to the FLP.

   True

   False

5 points

QUESTION 14

1. From an estate planning perspective, the benefits of a family limited partnership include:

   1. Reducing the value of the estate for estate tax purposes.
   2. Leveraging the value of lifetime gifts.
   3. Maintaining control over gifted assets during lifetime.

   I and II

   II only

   II and III

   I,II,and III

5 points

QUESTION 15

1. Which of the following is not a benefit associated with a family limited partnership?

   Retention of assets within the family unit through rights of first refusal.

   Ability to shift income to a lower income tax bracket family member.

   Greater IRS scrutiny.

   Protect the assets of the partnership from the creditors of individual partners.

5 points

QUESTION 16

1. All of the following are tax ramifications associated with the creation of a family limited partnership except:

   Gain or loss must be recognized when property is transferred into the partnership.

   The income taxes never paid by the partnership.

   The value of the general partners interest in the family limited partnership will be included in the general partners estate.

   Transfers of interests in the family limited partnership are gifts for gift tax purposes.

5 points

QUESTION 17

1. A limited liability company, by its nature, is best suited for what types of ventures?

   Professional practices.

   Real estate ventures.

   Oil and gas ventures.

   All of the above because of the risk factors associated with each.

5 points

QUESTION 18

1. Which of the following is not a discount reducing the value of an interest in a family limited partnership?

   Majority interest discount.

   Lack of marketability discount.

   Minority interest discount.

   Fractional interest discount.

5 points

QUESTION 19

1. ForQuestions 19and20:

   Tom and Lisa have amassed great wealth and they wish to shift some of that wealth to their children.Their children,however,have not shown the greatest responsibility in managing financial assets in the past.Tom and Lisa decide to create a family limited partnership.

   Which of the following assets should they not transfer into the FLP?

   Their mutual fund portfolio.They currently have income and dividends reinvested into the portfolio.

   Tom's prized possession his motorboat.He will not allow anyone else to use it.

   Their vacation home.The children use the home more than they do is they do not like making the long drive to the home.

   Their stock portfolio.The stocks were inherited last year from Lisa's father and they have not changed the investments.

5 points

QUESTION 20

1. Tom and Lisa transfer their mutual funds and their stock portfolio to the FLP. The value of assets transferred to the FLP is $1,000,000. They each have a 1% general partnership interest and 49% limited partnership interest. A valuation expert has indicated that they can take a 20% discount for lack of marketability and minority interests. If Tom and Lisa each gift their entire limited partnership interest to their four sons, what is the value of the taxable gifts that Tom has made?

   $1million

   $700,000

   $664,000

   $340,000