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ACCT 424 Week 7 Checkpoint

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ACCT 424 Week 7 Checkpoint

1. (TCO 10) Which, if any, factor should reduce the value of a note receivable included in the gross estate of the holder? (Points : 2)

The interest rate provided for is 9%.
The note is payable on demand.
The note is not supported by collateral.
The note is forgiven by the decedent’s will.
None of the above

2. (TCO 10) Which factor does not decrease the value of a gross estate? (Points : 2)

The election of § 2032 (alternate valuation date)
The election of § 2032A (special use valuation)
Stock involved represented a minority interest in a closely held corporation
Stock owned by the decedent who was the founder and key executive of a closely held corporation
None of the above

3. (TCO 10) In 2010, Arlene made a gift of stock (basis of $813,000, fair market value of $413,000) to her mother, Elizabeth. As a result of the transfer, Arlene paid a gift tax of $60,000. Elizabeth’s income tax basis in the stock is(Points : 2)

$413,000 basis for gain and loss.
$443,000 basis for gain and loss.
$813,000 basis for gain and $413,000 basis for loss.
$843,000 basis for gain and loss.
None of the above

4. (TCO 10) In June 2010, Debra made a gift of securities (basis of $613,000, fair market value of $913,000) to her uncle, upon which a gift tax of $60,000 was paid. The uncle died in July 2011, when the securities were worth $950,000. Under the terms of the uncle’s will, the securities return to Debra. Debra’s income tax basis in the securities is: (Points : 2)

$613,000.
$633,000.
$950,000.
$970,000.
None of the above

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5. (TCO 10) After a prolonged illness, Claire has been diagnosed as having a terminal illness. Which procedure best improves her federal gift and estate tax situation? (Points : 2)

She makes gifts to family members to help her estate qualify under § 6166 (extension of estate tax payments relative to an interest in a closely held business).
She issues large notes made payable to loved ones to increase her future § 2053 deductions for claims against the estate.
She makes gifts of her life insurance.
She makes enough taxable gifts to keep from losing any of her $1 million exemption equivalent for gift tax purposes.
None of the above

6. (TCO 10) The trustee of the Valdes Trust distributed an asset to Pamela, a qualifying income beneficiary. The asset’s basis to the trust was $20,000, and its fair market value on the distribution date was $100,000. Which statement is true? (Points : 2)

Lacking any election by the trustee, Pamela’s basis in the asset is $20,000.
Lacking any election by the trustee, the trust recognizes $80,000 gross income on the distribution.
Lacking any election by the trustee, Pamela’s basis in the asset is stepped up to $100,000.
Assuming that the trustee made an election under § 643(e), the trust is allowed a $20,000 distribution deduction for this transaction.
Assuming that the trustee made an election under § 643(e), Pamela recognizes $80,000 gross income on the distribution.

7. (TCO 10) The Yellow Trust incurred $10,000 of portfolio income. Its corporate trustee paid fiduciary fees of $1,000 therefrom. Yellow holds as one of its assets an insurance policy on the life of Marcia (the grantor). Premiums of $800 on this policy for the year were paid by Marcia. How much gross income does Marcia include with respect to these trust activities? (Points : 2)

$0
$800
$8,200
$9,000
$10,000

8. (TCO 10) During the current year, a trust received $80,000 of taxable interest income, paid trustee’s commissions of $8,000, and had no other income or expenses. The trust instrument requires that $40,000 be paid annually to Antoinette and $80,000 be paid annually to George. How much gross income must Antoinette and George recognize?(Points : 2)

$40,000 by Antoinette and $80,000 by George
$40,000 by Antoinette and $40,000 by George
$24,000 by Antoinette and $48,000 by George
$36,000 by Antoinette and $36,000 by George
None of the above

9. (TCO 10) The Aniston Estate generated distributable net income this year of $200,000, one-fourth of which was tax-exempt interest and the balance of which was long-term capital gain. Paul Aniston, the sole income beneficiary of the estate, received a distribution of the entire $280,000 fiduciary income of the entity. How does Paul report the distribution? (Points : 2)

$200,000 ordinary income
$280,000 ordinary income
$100,000 long-term capital gain, $100,000 exempt interest
$140,000 long-term capital gain, $140,000 exempt interest
$150,000 long-term capital gain, $50,000 exempt interest

10. (TCO 10) This year, the Nano Trust reported $50,000 entity accounting income and $40,000 distributable net income (DNI). Nano distributed $60,000 cash to Horatio, its sole income beneficiary. Nano is a simple trust. Nano’s distribution deduction is (Points : 2)

$40,000.
$50,000.
$60,000.
$0.

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ACCT 424 Week 7 Checkpoint

ACCT 424 Week 7 Checkpoint

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