1. Gift taxes paid on post-1976 gifts are generally allowed as a credit against the tentative estate tax. True or False. 2. The estate tax is not levied on tax-exempt municipal bonds. True or False. 3. If the spouse of the transferor under the Uniform Transfers to Minors Act is the custodian, the property is includible in the spouse's estate. True or False. 4. Norma and John Baker's jointly owned home (with right of survivorship) was fully paid for by John. Nevertheless, when Norma predeceased John, one-half the value of the home is includible in her estate. True or False. 5. Testamentary charitable gifts are deductible up to 50 percent of the adjusted gross estate. True or False. 6. The unified credit is the same for gift tax purposes as for estate tax purposes. True or False. 7. General powers of appointment that are limited by ascertainable standards do not bring property into the Estate Tax Return. True or False. 8. After selecting special use valuation, the farm value method is normally the preferred valuation technique. True or False. 9. The following assets, which are not part of the probate estate, nevertheless are includible in the gross estate, except: a) Property transferred to a revocable trust by the decedent 17 years prior to death  b) Property sold by the decedent two years prior to death for a private annuity of equal value  c) Property transferred to decedent's wife for life, then to their son if the son survives his mother, to the extent of the reversion  d) A life insurance policy transferred two and a half years ago on the decedent's life 10. Which of the following retained powers is not an "incident of ownership" in a life insurance policy? a) A power to use the policy as collateral for loans not to exceed one-half its cash value. b) A power to select a settlement option spelled out in the policy. c) The power to cancel a group policy indirectly by resigning a position. d) A power to veto a change of beneficiary after the transfer of the policy to the current beneficiary. 11. The following statements about "Qualified Terminable Interest Property" (QTIP) trusts are true, except: a) The QTIP trust is a "simple" trust and anyone, including a charity, may be the remainderman. b)  A QTIP trust may not be implemented prior to the grantor's death. c) Only the grantor's spouse may be the income beneficiary, but may refuse to accept the bequest and elect against the will d) If a trust otherwise qualifies, QTIP treatment may be elected for an undivided portion of the trust, such as 78 percent 12. John Marigold's estate incurred the following payments during administration: (1.) Charitable contributions of $15,000 (2.) Funeral expenses of $4,000 (3.) Mortgage payments of $5,000 (4.) Attorney's fees of $10,000 Which of the above amounts offer the executor an option to deduct the payments? a) (1), (2), (3), and (4) b) (1) and (2) c) (1) and (3) d) (4) 13. W.

1. 1. Gift taxes paid on post-1976 gifts are generally allowed as a
credit against the tentative estate tax. True or False.
2. The estate tax is not levied on tax-exempt municipal bonds.
True or False.
3. If the spouse of the transferor under the Uniform
Transfers to Minors Act is the custodian, the property is
includible in the spouse's estate. True or False.
4. Norma and John Baker's jointly owned home (with right of
survivorship) was fully paid for by John. Nevertheless, when
Norma predeceased John, one-half the value of the home is
includible in her estate. True or False.
5. Testamentary charitable gifts are deductible up to 50 percent
of the adjusted gross estate. True or False.
6. The unified credit is the same for gift tax purposes as for
estate tax purposes. True or False.
7. General powers of appointment that are limited by
ascertainable standards do not bring property into the Estate
Tax Return. True or False.
8. After selecting special use valuation, the farm value method
is normally the preferred valuation technique. True or False.
9. The following assets, which are not part of the probate estate,
nevertheless are includible in the gross estate, except:
a) Property transferred to a revocable trust by the decedent 17
years prior to death
b) Property sold by the decedent two years prior to death for a
private annuity of equal value

2. c) Property transferred to decedent's wife for life, then to their
son if the son survives his mother, to the extent of the
reversion
d) A life insurance policy transferred two and a half years ago
on the decedent's life
10. Which of the following retained powers is not an "incident
of ownership" in a life insurance policy?
a) A power to use the policy as collateral for loans not to
exceed one-half its cash value.
b) A power to select a settlement option spelled out in the
policy.
c) The power to cancel a group policy indirectly by resigning a
position.
d) A power to veto a change of beneficiary after the transfer of
the policy to the current beneficiary.
11. The following statements about "Qualified Terminable
Interest Property" (QTIP) trusts are true, except:
a) The QTIP trust is a "simple" trust and anyone, including a
charity, may be the remainderman.
b) A QTIP trust may not be implemented prior to the grantor's
death.
c) Only the grantor's spouse may be the income beneficiary, but
may refuse to accept the bequest and elect against the will
d) If a trust otherwise qualifies, QTIP treatment may be elected
for an undivided portion of the trust, such as 78 percent
12. John Marigold's estate incurred the following payments
during administration:
(1.) Charitable contributions of $15,000
(2.) Funeral expenses of $4,000
(3.) Mortgage payments of $5,000
(4.) Attorney's fees of $10,000

3. Which of the above amounts offer the executor an option to
deduct the payments?
a) (1), (2), (3), and (4)
b) (1) and (2)
c) (1) and (3)
d) (4)
13. Which of the following is not deductible in arriving at the
taxable estate?
a) Administration expenses
b) Casualty losses
c) Adjusted taxable gifts after 1976
d) All of the above.
14. Which of the following statements is true under current law:
a) All gifts made within three years of the decedent's death are
brought back into the estate and taxed.
b) The "three-year" rule no longer applies to any lifetime gifts
c) The "three-year" rule now applies mainly to gifts of life
insurance.
d) All of the above.
15. By which of these forms of ownership does the share of a
deceased owner pass automatically to the surviving owners
without being subject to the decedent's creditors:
a) Community property
b) Tenancy-in-common
c) Joint tenancy
d) All of the above
16. The decedent's final income tax return is due four months
after the date of death. True or False.
17. A decedent is allowed a full personal exemption on a final
income tax return regardless of date of death. True or False.

4. 18. An estate is entitled to the standard deduction. True or
False.
19. In determining what is income to a trust, federal laws
always take precedence over laws of the state in which the trust
is created. True or False.
20. A simple trust must distribute all of its taxable income each
year. True or False.
21. A trust agreement may provide explicit instructions on how
trust property is to be managed, invested, and paid out. Thus, a
grantor may control from the grave what he could have
controlled while he was alive. True or False.
22. When an estate or trust terminates all tax credits are lost.
True or False.
23. Estates and trusts operate under a three tier system of
taxation for their beneficiaries. True or False.
24. Business losses or capital losses incurred by a decedent
prior to death:
a) Can be carried over to an estate's income tax return.
b) Can be deducted by estate beneficiaries on their income tax
returns
c) End with the decedent's final income tax return.
d) Are not deductible on a decedent's final income tax return.
25. A trust created by a grantor during his own lifetime is called
a:
a) Grantor trust
b) Inter vivos trust
c) Testamentary trust
d) Simple trust

5. 26. Income distributions from an estate to estate beneficiaries
are recognized as income by beneficiaries on their tax returns
for the year in which the:
a) Distribution is received.
b) Estate's tax year ends
c) Income distribution was earned by the estate.
d) Income distribution was received by the estate.
27. The income distribution system used to determine the
taxation of estate income distributions to beneficiaries is a:
a) One-tier system
b) Two-tier system
c) Three-tier system
d) Four-tier system
28. Which of the following items is not normally in accounting
income (State Law Income) for a trust?
a) Rental income
b) Capital gains
c) Dividends
d) All of the above
29. How much is an S-corporation taxed on?
a) $6,000 c) $12,000 b) $8,000
d) $0
30. When an estate or trust terminates, a number of tax
attributes flow out to the beneficiaries. Which of the following
does not go out to the beneficiaries?
a) Passive losses
b) Net operating losses
c) Capital losses
d) Excess deductions