Taxation & Legal Considerations Flashcards
7 cards from real CEA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Taxation & Legal Considerations flashcards as text
A grantor who transfers a personal residence to a qualified personal residence trust (QPRT) retains the right to live there for 10 years. If the grantor dies in year 7 of the trust term, the residence:
Answer: Is included in the grantor's gross estate at its full FMV at death
If the grantor dies before the QPRT term ends, the full FMV of the residence is pulled back into the gross estate, negating the tax benefit.
Which valuation discount is most commonly applied when gifting a minority interest in a family limited partnership (FLP)?
Answer: Minority interest and lack of marketability discounts
Minority interest discounts (for lack of control) and lack-of-marketability discounts are routinely applied to FLP interests, reducing the taxable gift value.
A charitable lead annuity trust (CLAT) pays a fixed annuity to charity for a specified term, after which the remainder passes to:
Answer: Named non-charitable beneficiaries such as children
In a CLAT the charity receives income first, and then the remaining assets pass to the grantor's heirs, often with reduced gift or estate tax.
Under IRC § 2503(e), direct payments for tuition and medical expenses on behalf of another person:
Answer: Are excluded from gift tax without limit when paid directly to the provider
Section 2503(e) allows unlimited exclusion of direct tuition and medical payments to educational institutions and medical providers, in addition to the annual exclusion.
When an estate is required to file a federal estate tax return (Form 706), what is the standard filing deadline after the date of death?
Answer: 9 months
Form 706 is due within 9 months of the decedent's date of death, with a 6-month extension available upon request.
A testamentary trust is one that:
Answer: Takes effect and is funded at the grantor's death through the will
A testamentary trust is established within a will and does not come into existence or receive assets until the testator dies and the will is admitted to probate.
For federal income tax purposes, a revocable living trust is treated as:
Answer: A grantor trust whose income is reported on the grantor's personal Form 1040
Because the grantor retains control and can revoke the trust, all income is attributed to and taxed on the grantor's individual return under the grantor trust rules.