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

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

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

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.

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 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.

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

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

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

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.

CTA - Certified Tax Advisor Practice Test

CTA - Certified Tax Advisor Practice Test

CTA Estate, Gift, and Trust Taxation 3