1. The Jim Peterson Trust holds a vacation home which is rented out and holds some marketable securities and cash. The trust received tax-exempt income of $1,000, taxable income of $3,000, capital gains of $5,000 and rental income of $12,000. The trust had expenses of $10,000 which it incurred in maintaining the rental property. The trust distributed $25,000 to Jims son, Jimmy. What is the amount that the trust can deduct for distributions made to Jimmy?

1. $5,000
2. $11,000
3. $16,000
4. $25,000

2. Reginald, a wealthy widower, intends to gift property to his daughter, Jane, to reduce the value of his gross estate. Which property is best for Reginald to keep?

1. Commercial property located in another state worth $10 million.
2. Industrial condos worth $10 million that Jane intends to sell after Reginald dies.
3. Stock that Reginald owns in a rapidly appreciating tech company worth $10 million.
4. A $10 million life insurance policy Reginald owns on his life.

3. Hank is a single businessman with inadequate liquidity to cover estate administrative expenses, debts, and taxes at his death. He plans to purchase a life insurance policy which provides a tax-free investment, steady returns, and an immediate cash value. Which type of policy should Hank purchase?

1. Straight whole life
2. Survivorship life insurance
3. Single premium whole life
4. Variable life

4. Sal and his wife Stella own a bakery and they want to maintain control. Their daughter Priscilla is a divorced parent who is struggling to make ends meet. Sal and Stella want to give Priscilla $30,000 a year, but they are cash poor because almost all their wealth is tied up in their business. Which of the following would be the most appropriate approach for Sal and Stella to consider?

1. An installment sale of the business to Priscilla, she could use the profits from the business to pay the note and keep any excess funds for support.
2. Sal and Stella could make Priscilla an employee and pay her even though she does not actually work at the bakery. Her salary would then be deductible as a business expense.
3. Using the gift-leaseback technique, Sal and Stella can transfer the bakery equipment into a trust with Priscilla as the beneficiary. They could then transfer lease payments to the trust each year for Priscillas support.

5. Archie, age 72, is a widower who owns a partial interest in a ski resort in Vermont. His ownership interest in the property is currently valued at $8 million. The ski resort continues to appreciate every year, and Archies estate is now worth $10.5 million. Archie wants to remove this property from his gross estate, and he is contemplating making a gift of his interest to his son Tyler, a successful hedge fund manager. However, Archie realizes he may need the income from the property for the rest of his life. What planning technique will meet Archies objectives?

1. An installment sale
2. A gift lease-back
3. An outright gift of his shares in the ski resort to Tyler.
4. A private annuity