Part 1

If D creates a trust to last for 10 years, with income to D for the 10 year period and at the end of 10 years, remainder to X or Xs estate. In year 8 the trust is worth $5,000,000 and D's life estate is worth $2,000,000. In that year D sells his life estate to the trust for its $2,000,000 actuarial value and dies 2 years later. Assuming the trust had a value of $6,000,000 at D's death, the amount of trust property includible in D's gross estate, if any,

is:

A. $2,000,000

B. $5,000,000

C. $4,000,000

D. $-0-

Part 2

If D, at age 70, creates a trust in which he retains the income for 20 years, with the remainder payable to his children.

A. No, because D only owned an income interest at death.

B. No, because he transferred property to a trust during his life

C. No, because D retained an interest for a period not tied to his life.

D. Yes, because D died during an income retention period which did not end before his death.