CEA Taxation & Legal Considerations 3

Question 1

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:

Accepted Answer

Is included in the grantor's gross estate at its full FMV at death

Answer

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.

Question 2

Which valuation discount is most commonly applied when gifting a minority interest in a family limited partnership (FLP)?

Accepted Answer

Minority interest and lack of marketability discounts

Answer

Minority interest discounts (for lack of control) and lack-of-marketability discounts are routinely applied to FLP interests, reducing the taxable gift value.

Question 3

A charitable lead annuity trust (CLAT) pays a fixed annuity to charity for a specified term, after which the remainder passes to:

Accepted Answer

Named non-charitable beneficiaries such as children

Answer

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.

Question 4

Under IRC § 2503(e), direct payments for tuition and medical expenses on behalf of another person:

Accepted Answer

Are excluded from gift tax without limit when paid directly to the provider

Answer

Section 2503(e) allows unlimited exclusion of direct tuition and medical payments to educational institutions and medical providers, in addition to the annual exclusion.

Question 5

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?

Accepted Answer

9 months

Answer

Form 706 is due within 9 months of the decedent's date of death, with a 6-month extension available upon request.

(CEA) Certified Estate Advisor Practice Test

(CEA) Certified Estate Advisor Practice Test

CEA Taxation & Legal Considerations 3