AFIP AFIP Taxation and Estate Planning in F&I 2 — Questions and Answers
Question 1: What is the federal estate tax exemption threshold (as of recent law) that determines whether an estate owes federal estate tax?
- $1 million
- $5.49 million
- Approximately $12–13 million per individual (indexed for inflation) (Correct answer)
- $500,000
Correct answer: Approximately $12–13 million per individual (indexed for inflation)
The Tax Cuts and Jobs Act of 2017 raised the federal estate tax exemption to over $12 million per individual, indexed for inflation, though it is set to revert unless Congress acts.
Question 2: In F&I, why is it important to understand a customer's estate planning status when selling life insurance products?
- To determine the customer's credit tier for loan approval
- To ensure the beneficiary designations align with the customer's estate plan and avoid probate complications (Correct answer)
- To calculate the sales tax on the insurance premium
- To determine whether the vehicle qualifies for a luxury tax exemption
Correct answer: To ensure the beneficiary designations align with the customer's estate plan and avoid probate complications
Proper beneficiary designations on insurance policies ensure proceeds pass directly to intended heirs outside probate, consistent with the customer's overall estate plan.
Question 3: Which type of IRS form is issued to report interest income paid to a lender that exceeds $600 in a tax year?
- Form 1099-INT
- Form 1098 (Correct answer)
- Form W-2
- Form 1099-MISC
Correct answer: Form 1098
Form 1098 (Mortgage Interest Statement) is issued by lenders to report mortgage interest received; for auto loans, interest paid is generally not reported on a tax form to the borrower.
Question 4: A 'transfer on death' (TOD) vehicle title designation allows:
- The vehicle to be sold at auction upon the owner's death to pay estate taxes
- The vehicle title to pass directly to a named beneficiary at death without probate (Correct answer)
- The lender to repossess the vehicle immediately upon the borrower's death
- Co-owners to transfer their share to each other during their lifetimes
Correct answer: The vehicle title to pass directly to a named beneficiary at death without probate
A TOD designation on a vehicle title allows the named beneficiary to claim the vehicle directly from the DMV after the owner's death, bypassing probate.
Question 5: For a business that purchases a vehicle for commercial use, Section 179 of the IRS tax code allows:
- A deduction for sales tax paid on the vehicle purchase
- An immediate expensing deduction for the cost of qualifying business property in the year of purchase (Correct answer)
- A credit against payroll taxes for vehicle maintenance costs
- A refund of use tax for cross-state commercial travel
Correct answer: An immediate expensing deduction for the cost of qualifying business property in the year of purchase
Section 179 allows businesses to deduct the full purchase price of qualifying vehicles and equipment in the year placed in service rather than depreciating over multiple years.
Question 6: What is 'gift tax' in the context of transferring a vehicle to a family member?
- A state DMV fee charged for title transfers between family members
- A federal tax on transfers of property by gift that exceed the annual exclusion amount (Correct answer)
- A dealer fee waived when selling to immediate family
- A penalty for underreporting the vehicle's value on the title transfer
Correct answer: A federal tax on transfers of property by gift that exceed the annual exclusion amount
Federal gift tax applies to gifts exceeding the annual exclusion ($18,000 per recipient in 2024), though a lifetime exemption means most people never actually pay it.
AFIP AFIP Taxation and Estate Planning in F&I 2
What is the federal estate tax exemption threshold (as of recent law) that determines whether an estate owes federal estate tax?