CEA Taxation & Legal Considerations 5

Question 1

A decedent's estate includes farmland worth $3 million at its highest-and-best-use value but only $1.5 million as a working farm. Under IRC § 2032A, the executor may elect to value the farmland at:

Accepted Answer

Its special-use value of $1.5 million, subject to statutory limits

Answer

IRC § 2032A allows qualifying real property used in farming or a closely-held business to be valued at its special-use value, reducing the gross estate, subject to a maximum reduction limit.

Question 2

A decedent's will leaves 'all residuary assets to charity.' What marital or charitable deduction applies to reduce the taxable estate?

Accepted Answer

Charitable deduction, unlimited in amount for qualifying organizations

Answer

IRC § 2055 allows an unlimited estate tax charitable deduction for bequests to qualifying § 501(c)(3) organizations.

Question 3

Which installment payment election under IRC § 6166 allows an estate to defer and pay estate taxes attributable to a closely-held business interest over an extended period?

Accepted Answer

Up to 5 years deferral then 10 annual installments

Answer

IRC § 6166 allows an estate to defer paying the portion of estate tax attributable to a qualifying closely-held business for up to 5 years (interest only), then pay in up to 10 annual installments.

Question 4

For state estate or inheritance tax planning, which statement is most accurate?

Accepted Answer

Some states have lower exemption thresholds than the federal exemption, requiring separate state-level planning

Answer

A number of states have their own estate or inheritance taxes with exemptions well below the federal threshold, making state-specific planning essential.

Question 5

An irrevocable trust distributes $20,000 of ordinary income to a beneficiary. The trust's distributable net income (DNI) is $15,000. How much income is the beneficiary required to include in gross income?

Accepted Answer

$15,000, limited to the trust's DNI

Answer

Under the conduit rules, a beneficiary's inclusion is limited to the lesser of the distribution or DNI; here DNI of $15,000 caps the taxable amount.

(CEA) Certified Estate Advisor Practice Test

(CEA) Certified Estate Advisor Practice Test

CEA Taxation & Legal Considerations 5