What is estate tax?
A) A tax on the transfer of property at death
B) A tax on income earned by individuals
C) A tax on the purchase of real estate
D) A tax on corporate profits
Answer: A
What is gift tax?
A) A tax on transfers of property during a person’s lifetime
B) A tax on the sale of gifts
C) A tax on charitable contributions
D) A tax on inheritances
Answer: A
Which of the following is NOT included in the gross estate for estate tax purposes?
A) Life insurance proceeds payable to the estate
B) Real estate owned by the decedent
C) Property gifted to others before death
D) Bank accounts in the decedent’s name
Answer: C
What is the primary purpose of the estate tax?
A) To tax the transfer of wealth from deceased individuals
B) To tax earned income
C) To tax corporate profits
D) To tax sales of goods
Answer: A
What is the gift tax exclusion amount for a single person per year as of 2024?
A) $15,000
B) $17,000
C) $20,000
D) $30,000
Answer: B
Which of the following is a valid deduction from the gross estate?
A) Charitable bequests
B) Gift tax paid on prior gifts
C) Mortgage debt on property
D) All of the above
Answer: D
What is the marital deduction?
A) A deduction for property passed to a surviving spouse
B) A deduction for gifts made to charities
C) A deduction for estate taxes paid
D) A deduction for personal property
Answer: A
What is the unified credit in estate and gift tax?
A) A credit against both estate and gift taxes
B) A deduction for charitable donations
C) A credit for income taxes
D) A credit for mortgage interest
Answer: A
What is the lifetime gift tax exemption amount as of 2024?
A) $11.7 million
B) $12.9 million
C) $15 million
D) $20 million
Answer: B
Which form is used to report estate taxes?
A) Form 706
B) Form 1040
C) Form 709
D) Form 1041
Answer: A
Which form is used to report gifts that exceed the annual exclusion amount?
A) Form 706
B) Form 1040
C) Form 709
D) Form 1041
Answer: C
What is a “gift splitting” election?
A) An option for married couples to combine their gift tax exclusions for a single gift
B) An option to divide estate assets equally among heirs
C) An option to allocate estate tax deductions
D) An option to split the estate tax burden between spouses
Answer: A
What is the primary purpose of the gift tax?
A) To tax transfers of wealth made during a person’s lifetime
B) To tax income earned by individuals
C) To tax corporate profits
D) To tax sales of goods
Answer: A
Which of the following types of property is generally not subject to estate tax?
A) Property held in a revocable living trust
B) Property passed to a surviving spouse
C) Property owned by a business
D) Property held in a life insurance policy
Answer: B
What is the concept of “basis” in relation to estate tax?
A) The value of property used to determine capital gains or losses when sold
B) The amount of taxes owed on the estate
C) The total value of the estate
D) The amount of annual exclusion for gifts
Answer: A
Which of the following is true about the estate tax in the United States?
A) It is only applicable to estates exceeding a certain value threshold
B) It is a flat tax rate applied to all estates
C) It applies only to the income generated by the estate
D) It is applied to gifts made within a person’s lifetime
Answer: A
Which of the following types of gifts are exempt from gift tax?
A) Gifts to a spouse
B) Gifts to charitable organizations
C) Gifts for educational or medical expenses paid directly to the provider
D) All of the above
Answer: D
What is the “estate tax exemption amount” as of 2024?
A) $11.7 million
B) $12.9 million
C) $15 million
D) $20 million
Answer: B
What is a “generation-skipping transfer tax”?
A) A tax on transfers of wealth that skip one or more generations
B) A tax on annual gifts
C) A tax on transfers to charities
D) A tax on estate assets
Answer: A
What is a “credit shelter trust”?
A) A trust that allows the use of the estate tax exemption for both spouses
B) A trust that shelters assets from income tax
C) A trust that provides for charitable contributions
D) A trust that protects assets from creditors
Answer: A
Which of the following items is typically included in the gross estate for estate tax purposes?
A) Retirement accounts
B) Life insurance proceeds
C) Real estate
D) All of the above
Answer: D
What does “basis adjustment” refer to in estate planning?
A) Adjusting the basis of inherited property to its fair market value at the date of death
B) Changing the value of gifts made during a person’s lifetime
C) Adjusting the annual gift exclusion amount
D) Adjusting the value of life insurance policies
Answer: A
Which of the following is an example of a gift that is not subject to gift tax?
A) A gift to a qualified charity
B) A gift of cash exceeding the annual exclusion amount
C) A gift to a foreign national
D) A gift of property valued over the lifetime exemption amount
Answer: A
What is the tax treatment of a gift made directly to a medical provider or educational institution?
A) It is excluded from gift tax
B) It is subject to gift tax
C) It is subject to income tax
D) It is subject to estate tax
Answer: A
Which of the following is a typical exception to the estate tax?
A) Property transferred to a spouse
B) Property transferred to a charity
C) Property under the annual gift tax exclusion
D) Both A and B
Answer: D
How is the value of an estate determined for tax purposes?
A) By calculating the fair market value of the estate assets at the date of death
B) By calculating the historical cost of estate assets
C) By the sale price of the estate assets
D) By the appraised value of the estate assets before death
Answer: A
What is a “living trust”?
A) A trust created during a person’s lifetime that can hold and manage assets
B) A trust that only takes effect after death
C) A trust used to avoid income taxes
D) A trust that automatically transfers assets to heirs
Answer: A
Which of the following statements is true about gift splitting between spouses?
A) It allows spouses to combine their annual gift exclusions for a single gift
B) It allows spouses to split the estate tax liability equally
C) It allows for double the gift tax exemption for charitable gifts
D) It allows for unlimited gifts to each other
Answer: A
What is the impact of the estate tax on life insurance proceeds?
A) They are included in the gross estate unless held in an irrevocable trust
B) They are excluded from the gross estate
C) They are taxed separately from the estate
D) They are taxed at a lower rate than other estate assets
Answer: A
What is “taxable estate”?
A) The gross estate minus allowable deductions
B) The total value of all estate assets
C) The amount of estate tax due
D) The value of gifts made during life
Answer: A
What is the “gift tax annual exclusion amount” for a married couple giving to one recipient in 2024?
A) $15,000
B) $30,000
C) $17,000
D) $34,000
Answer: B
What is a “taxable gift”?
A) A gift that exceeds the annual exclusion amount
B) A gift made to a charity
C) A gift made to a spouse
D) A gift made directly to a medical provider
Answer: A
How are gifts to political organizations treated for gift tax purposes?
A) They are not subject to gift tax
B) They are subject to gift tax
C) They are taxed at a higher rate
D) They are exempt from income tax but not gift tax
Answer: A
What is a “revocable living trust”?
A) A trust that can be altered or revoked by the grantor during their lifetime
B) A trust that takes effect only after the grantor’s death
C) A trust that cannot be changed once established
D) A trust used solely for charitable purposes
Answer: A
Which of the following does NOT reduce the gross estate for estate tax purposes?
A) Debts and mortgages
B) Charitable contributions
C) Medical expenses paid by the estate
D) Funeral expenses
Answer: C
What is the purpose of the “exemption equivalent” in estate and gift tax?
A) To provide a unified credit amount against estate and gift taxes
B) To provide an additional deduction for charitable gifts
C) To provide a deduction for medical expenses
D) To provide a credit for state taxes paid
Answer: A
Which of the following is NOT typically deductible from the gross estate?
A) Funeral expenses
B) Debts owed by the decedent
C) Personal property of the decedent
D) Expenses related to estate administration
Answer: C
What is the purpose of the “generation-skipping transfer tax” (GSTT)?
A) To tax transfers of wealth that skip generations to prevent avoiding estate tax
B) To tax income earned by the estate
C) To tax charitable donations
D) To tax gifts made within a person’s lifetime
Answer: A
Which of the following is an example of a gift that qualifies for the annual gift tax exclusion?
A) A gift of $17,000 to a friend
B) A gift of $20,000 to a charity
C) A gift of $25,000 to a spouse
D) A gift of $30,000 to a political organization
Answer: A
What is the “spousal portability” provision in estate tax?
A) It allows a surviving spouse to use any unused estate tax exemption amount from the deceased spouse
B) It allows spouses to combine their estate tax exemptions
C) It allows the transfer of assets between spouses without tax
D) It allows for an additional deduction for estate taxes paid
Answer: A
Which of the following items is NOT subject to gift tax?
A) Gifts made to a spouse
B) Gifts made to a qualified charity
C) Gifts made to a foreign national
D) Gifts made for educational expenses directly to the educational institution
Answer: C
What is the “estate tax rate” as of 2024?
A) 40%
B) 30%
C) 25%
D) 20%
Answer: A
Which of the following assets is included in the gross estate for estate tax purposes?
A) A vacation home owned by the decedent
B) A bank account in the decedent’s name
C) Life insurance proceeds payable to the estate
D) All of the above
Answer: D
What does “probate” refer to in estate administration?
A) The legal process of validating a will and administering an estate
B) The process of transferring assets to beneficiaries
C) The process of filing income taxes for the estate
D) The process of valuing estate assets
Answer: A
What is the “gift tax exclusion” for gifts made to each individual recipient by a married couple in 2024?
A) $15,000
B) $17,000
C) $30,000
D) $34,000
Answer: C
Which of the following is a deductible estate expense?
A) Costs of administering the estate
B) Costs of personal legal services
C) Costs of personal medical expenses
D) Costs of personal living expenses
Answer: A
What is the role of a “trustee” in managing a trust?
A) To manage and distribute the trust assets according to the terms of the trust
B) To make decisions about the trust’s tax payments
C) To invest trust assets in their own name
D) To determine the value of the estate
Answer: A
What is the “gift tax exclusion amount” for gifts made by individuals in 2024?
A) $15,000
B) $17,000
C) $20,000
D) $25,000
Answer: B
Which of the following gifts would not be subject to gift tax?
A) A gift of $30,000 to a child
B) A gift of $5,000 to a qualified charity
C) A gift of $15,000 to a friend
D) A gift of $25,000 to a spouse
Answer: B
What does “step-up in basis” mean for inherited property?
A) The property’s basis is adjusted to its fair market value at the date of the decedent’s death
B) The property’s basis is decreased to its purchase price
C) The property’s basis remains the same as it was before the decedent’s death
D) The property’s basis is adjusted to the market value at the time of transfer
Answer: A