Reference no: EM133110593

1. Fred and Adele have a sizable estate ($4.5 million). They desire a stream of income to supplement their retirement income while also qualifying them for a charitable deduction. They feel they can use $1 million of their assets to fund this stream. They plan to give the $1 million to the American Heart Association; they are to receive $50,000 per year for 20 years (to supplement their other retirement income). What are the characteristics of the type of trust that can achieve this objective?

A. Fred and Adele can make additions to the trust as their cash flow permits.

B. There is no inflation protection in the distribution of income, but it is a guaranteed amount for 20 years.

C. The trust assets must be revalued annually in order to determine the income payout amount

D. Fred and Adele's income stream will fluctuate with the value of the portfolio, each year

2. Shari has a gross estate of $1,000,000. Her funeral costs are $6,000. She leaves $10,000 to her church and $4,000 to her college. She has a home mortgage for $60,000 and miscellaneous debts of $4,000. Her executor's fee and estate administration expenses are estimated to be $30,000. She leaves $200,000 to her husband. What is the total amount deductible by using the marital deduction and the charitable deduction?

A. $60,000

B. $74,000

C. $200,000

D. $214,000

3. Grandfather dies and leave $10 million to his grandson in his will. Has a direct skip occurred? Will the grandfather, or the grandson, be responsible for paying any generation skipping transfer tax?

A. Yes. Grandfather

B. Yes. Grandson

C. No. Grandson

D. No. Grandfather

4. Which of the following statements concerning income taxation of estates and trusts is correct?

I. An estate is a separate taxpaying entity.

II. Income distributed by a trust to an income beneficiary of the trust is taxable to the trust.

III. The executor or administrator of an estate is responsible for filing an income tax return for the estate annually.

A. I, II, and III

B. II only

C. I only

D. Both I and III

5. All the following statements concerning tenancies in common are correct EXCEPT:

A. There are no survivorship rights.

B. Ownership interests must be equally divided.

C. Each co-tenant is free to sell or dispose of his interest in the property to whomever he wishes.

D. When a co-tenant sells his interest, the new owner becomes a tenant-in-common with the remaining owners.