1. Which of the following beneficiaries will qualify as a designated beneficiary?

The ASPCA

My trust. The trust that names a surviving spouse and then a charity as beneficiaries.

My nieces and nephews.

None of the above.

2. Which of the following strategies will achieve the greatest income tax savings at a decedents death?

The decedent names his children as the beneficiary of his retirement plans.

The decedent names his spouse as the beneficiary of his retirement plans.

The decedent names his estate as the beneficiary of his retirement plans.

The decedent names his church as the beneficiary of his retirement plans.

3. In 2005, Joe who is 75 years old, created a 10 year GRAT into which he transferred $1 million of securities. Joes basis in the securities is $250,000. At the time Joe transferred the assets into the GRAT, the IRC Sec. 7520 rate was 4.8%. Joes annuity interest was valued at $311,000. At the end of the 10 years, the assets within the trust transfer to Joes brothers and sisters. When the GRAT was created, what was the value of the taxable gift:

$311,000

$689,000

$750,000

$1,000,000

4. In 2005, Joe who is 75 years old, created a 10 year GRAT into which he transferred $1 million of securities. Joes basis in the securities is $250,000. At the time Joe transferred the assets into the GRAT, the IRC Sec. 7520 rate was 4.8%. Joes annuity interest was valued at $311,000. At the end of the 10 years, the assets within the trust transfer to Joes brothers and sisters. Joe dies in 20012 when the value of the trust is $1,200,000. What amount of the trust assets will be included in Joes gross estate?

Zero

$ 311,000

$ 1,000,000

$ 1,200,000

5. A qualified annuity interest provides the grantor with a fixed percentage of the initial trust value and allows the grantor to make subsequent contributions may into the trust.

True

False

6. John owns real estate with a fair market value of $1 million in which he has a basis of $250,000. In 2005, John sold the property to his son, Junior, for $1 million, subject to an installment note. Junior must pay the $1 million plus interest over 5 years. The note provides Unless 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 is true?

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

The unpaid installment payments are IRD.

No premium will be attached to the note since this is not a SCIN.

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

7. 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 what to pay a gift tax. Which of the following is the most appropriate strategy to allow Cameron to transfer the business interest to Lucy.

An installment sale of Camerons 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.

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

True

False

9. 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. 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?

$1,000,000

$700,000

$664,000

$340,000

10. 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.