12. Gifts of a remainder interest to charity are subject to gift taxation because the charitable deduction requires a present interest.

True

False

13. An endowment policy is one of the least expensive forms of life insurance.

True

False 1

4 Only an insured can own life insurance on his or her own life.

True

False

15. Arthur, Murray, and Strauss are equal owners of the AMS company, which in their most recent "value setting meeting" they agreed had a net value of $660,000. They each have a basis in their respective shares of $50,000. Their business buyout agreement requires them to use life insurance as part of a cross purchase plan. Each owner must have a policy equal to the amount necessary to pay 150% of the owner's potential obligation using the most recent value setting. Upon the death of a co-owner the business will be appraised and the survivors must purchase the decedent's interest (borrowing or finding other funds if the life insurance is insufficient). In the question immediately above, how many insurance policies need to be purchased? some other number

6

1

9

3

16. Other things the same, planning would more likely recommend the pre-death sale of a product oriented rather than a service oriented company.

True

False

17. The formula method of determining the value of a business pursuant to a buyout agreement is generally less flexible than the appraisal method.

True

False

18. For handling client incapacity, durable powers of attorney are frequently used in conjunction with a living trust.

True

False

19. A power that allows a beneficiary to demand that property from a bypass trust be given to her if such is needed for her health, education, maintenance or support is not considered a general power.

True

False

20. Clancy's trust contains a spendthrift clause. That clause:

is not foolproof because creditors can seize trust assets

is not foolproof because creditors can go after the beneficiary

is foolproof, protecting Clancy and the trust assets

is not foolproof because the beneficiary can still use trust corpus as collateral

21. Which of the following fiduciaries can best be described as a surrogate parent?

Conservator of the estate.

Trustee of a minor's demand trust.

Conservator of the person.

Guardian of the estate.

Guardian of the person.

22. The alternate valuation date

can reduce income tax

reduces the taxable estate

is available to probate estates only

increases total estate tax deductions

23. Theoretically, the valid exercise of a tax effective disclaimer cannot possibly increase the estate tax.

True

False

24. The executor's commission election for a decedent's estate involves a choice between deducting it on the estate's income tax return (form 1041) or the estate tax return (form 706).

True

False

25. Section 2032A (special use valuation) is available only if the decedent owned a family run farm or ranch.

True

False