AEP Taxation in Estate Planning 2

Question 1

Which valuation discount is most commonly applied when transferring minority interests in a family limited partnership (FLP) for estate tax purposes?

Accepted Answer

Minority interest discount

Answer

A minority interest discount reflects the lack of control a minority owner has, and it is the most frequently applied discount in FLP transfers.

Question 2

A grantor retained annuity trust (GRAT) is most effective when the assets transferred into it are expected to:

Accepted Answer

Appreciate at a rate exceeding the IRS Section 7520 rate

Answer

A GRAT succeeds when trust assets outperform the Section 7520 hurdle rate, passing the excess appreciation to heirs gift-tax-free.

Question 3

For federal estate tax purposes, the alternate valuation date allows an executor to value estate assets as of:

Accepted Answer

Six months after the date of death

Answer

IRC §2032 permits the executor to elect alternate valuation using asset values six months after death, but only if doing so reduces both the gross estate and the estate tax.

Question 4

Under IRC §2056A, a Qualified Domestic Trust (QDOT) is used to defer estate taxes when:

Accepted Answer

The surviving spouse is not a U.S. citizen

Answer

A QDOT defers the estate tax marital deduction for a non-citizen surviving spouse, ensuring U.S. tax is collected before assets leave U.S. jurisdiction.

Question 5

Which IRC section governs the inclusion of assets in a decedent's gross estate when the decedent retained a life interest in transferred property?

Accepted Answer

IRC §2036

Answer

IRC §2036 requires inclusion of transferred property in the gross estate when the decedent retained the right to income or possession for life.

(AEP) Accredited Estate Planner Practice Test

(AEP) Accredited Estate Planner Practice Test

AEP Taxation in Estate Planning 2