CTA Estate, Gift, and Trust Taxation 3

Question 1

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

Accepted Answer

Lack of marketability and minority interest discounts

Answer

Premium for undivided interest in real estate

Answer

Appreciation discount for growth assets

Answer

Income acceleration discount

Question 2

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

Accepted Answer

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

Answer

Fair market value for highest and best use

Answer

A flat discount of 40% from fair market value

Answer

Zero if the heirs continue farming

Question 3

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

Accepted Answer

A gift transferred directly to a grandchild

Answer

A gift to a surviving spouse

Answer

A gift to an adult child

Answer

A gift to a sibling

Question 4

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

Accepted Answer

Dynasty trust (perpetual trust)

Answer

Revocable living trust

Answer

Testamentary trust

Answer

Qualified terminable interest property (QTIP) trust

Question 5

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

Accepted Answer

Six months after the date of death

Answer

One month after the decedent's death

Answer

The end of the calendar year of death

Answer

Any date within one year of death

Question 6

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

Accepted Answer

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

Answer

Eliminate estate taxes for all beneficiaries

Answer

Allow the surviving spouse full control over inherited assets

Answer

Avoid the GST tax on transfers to grandchildren