1. Which of the following statements concerning income taxation of trusts and estates is correct?
a) A simple trust is allowed an exemption of $500.
b) A complex trust is allowed an exemption of $1,000
c) An estate is taxed the same as a grantor trust.
d) An estate is allowed an exemption of $600
2. Which of the following statements concerning the federal estate tax charitable deduction is correct?
a) In order to be allowed as a charitable deduction, the bequest must first be includible in the donor’s gross estate.
b) The amount of the deduction is limited to a percentage of the adjusted gross estate.
c) For the deduction to be obtained, the bequest must be in the form of an outright gift.
d) The amount of the deduction will be increased by the amount of any estate taxes paid from the charitable bequest.
3. Which of the following statements concerning installment sales of property is correct?
a) Payments must occur in more than 2 tax years before installment reporting is permitted.
b) Installment notes must be unsecured or adverse income tax consequences will result.
c) Installment sales follow installment reporting for tax accounting purposes unless the seller elects normal tax reporting.
d) The seller first recovers all federal income tax basis tax free before recognizing any capital gain.
4. Which of the following items would be included in a decedent’s gross estate for federal estate tax purposes?
a) a life insurance policy on the decedent’s life that was transferred by the decedent 2 years earlier to an irrevocable trust for the benefit of her children
b) proceeds of a wrongful death suit brought by the decedent’s executor against the drunk driver who caused the decedent’s death
c) real estate given to the decedent by an aunt that, in accordance with the aunt’s will , passes to the decedent’s sister at the decedent’s death.
d) property in a trust established by the decedent’s father for his grandchildren with the decedent and the decedent’s sister as co-trustees of the trust.