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Estate, Gift, and Trust Taxation Flashcards

6 cards from real CTA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 6 Estate, Gift, and Trust Taxation flashcards as text

  1. Which of the following is a valid valuation discount used in estate planning for transferred business interests?

    Answer: Lack of marketability and minority interest discounts

    Minority interest discounts and lack-of-marketability discounts can reduce the gift or estate tax value of transferred business interests.

  2. A special use valuation election under IRC Section 2032A allows an estate to value farm or business real property at:

    Answer: Its actual use value rather than its highest and best use value

    Section 2032A allows qualifying farm and business real property to be valued based on its actual use rather than its fair market value, potentially reducing estate taxes significantly.

  3. Which gift is considered a 'direct skip' for generation-skipping transfer tax purposes?

    Answer: A gift transferred directly to a grandchild

    A direct skip is a transfer subject to gift or estate tax made directly to a skip person, such as a grandchild, bypassing the intermediate generation.

  4. Which trust strategy is designed to last multiple generations and benefit descendants indefinitely, often avoiding estate taxes at each generation?

    Answer: Dynasty trust (perpetual trust)

    A dynasty trust is designed to hold assets for multiple generations, avoiding estate taxes at each generational level by using GST tax exemption.

  5. The alternate valuation date under IRC Section 2032 allows an estate to value assets as of:

    Answer: Six months after the date of death

    Section 2032 permits the executor to elect to value estate assets as of six months after the date of death if doing so reduces both the gross estate and the estate tax.

  6. A QTIP trust (Qualified Terminable Interest Property trust) is commonly used in estate planning to:

    Answer: Provide income to a surviving spouse while directing the ultimate disposition of the principal to other heirs

    A QTIP trust provides income to the surviving spouse (qualifying for the marital deduction) while ensuring that the principal ultimately passes to heirs chosen by the first spouse.