Solved by verified expert :2353. CHAPTER
19—FAMILY TAX PLANNING Question MC #11
At the time of Rick’s death, he owned 70% of the stock in Robin Corporation, a
closely held family business. Over the past five years, Robin has averaged
annual profits of $400,000 in an industry where the usual rate of return is 9%.
If the book value of the corporation’s assets is $1,000,000 and goodwill
exists, what might be a realistic value of the stock in Rick’s gross estate?
a.
$2,550,000.
b. $1,785,000.
c. $1,550,000.
d. $310,000.
e. None of the above.
2354. CHAPTER
19—FAMILY TAX PLANNING Question MC #12
With respect to a stock interest in a closely held corporation, which, if any,
of the following factors work to increase
the gross estate value of the interest?
a.
The stock is not marketable.
b. A majority interest is involved.
c. The profits of the business are less
than the industry average.
d. The blockage rule applies.
e. None of the above.
2355. CHAPTER
19—FAMILY TAX PLANNING Question MC #13
Which, if any, of the following statements properly characterize features
involving buy-sell agreements?
a.
If properly structured, the agreements can control valuation for estate tax
purposes.
b. If a stock redemption is proposed,
utilize a cross-purchase type.
c. Agreements cannot be used to control
disposition of partnership interests.
d. Arrangements work best when the
interest to be transferred involves publicly traded securities.
e. None of the above.
2356. CHAPTER
19—FAMILY TAX PLANNING Question MC #14
In a typical “estate freeze” involving stock:
a.
The owner makes a gift of both common and preferred stock.
b. The preferred stock is subject to the
gift tax but not to the estate tax.
c. The common stock is subject to the
gift tax but not to the estate tax.
d. The common stock is subject to both
the gift tax and the estate tax.
e. None of the above.
2357. CHAPTER
19—FAMILY TAX PLANNING Question MC #15
Dustin owns all of the stock of Gold Corporation which includes both common and
preferred shares. The preferred stock is noncumulative, has no redemption date,
and possesses no liquidation preference. In 1995, Dustin makes a gift to his
adult children of all of the common stock. He dies in 2011 still owning the
preferred stock. The value of the Gold stock on the relevant dates is:
1995
2011
Preferred
$ 400,000
$ 500,000
Common
3,000,000
5,000,000
One of the tax consequences of this estate freeze is:
a.
Dustin’s gross estate includes $0 as to the stock.
b. Dustin’s gross estate includes
$5,000,000 as to the stock.
c. Dustin made a gift of $400,000 in
1995.
d. Dustin made a gift of $3,400,000 in
1995.
e. None of the above is correct.
2358. CHAPTER
19—FAMILY TAX PLANNING Question MC #16
In a typical estate freeze involving family limited partnerships established by
parents for their children:
a.
By gift, the parents transfer interests as general partners, retaining the
limited partnership interests.
b. By gift, the parents transfer limited
partnership interests, retaining the general partner interests.
c. The interests transferred to the
children involve the control of the business.
d. As to the interests passing to the
children, large discounts are claimed due to the blockage factor.
e. None of the above.
2359. CHAPTER
19—FAMILY TAX PLANNING Question MC #17
To prove successful in freezing the value of an interest in a family limited
partnership (FLP), which, if any, of the following techniques is desirable?
a.
The FLP should be created just prior to death to avoid the appearance of being
tax motivated.
b. The FLP should be largely funded with
personal assets (e.g., personal residence).
c. When valuing the FLP interest, apply
a large discount, to provide a safety zone for later bargaining with the IRS.
d. Appraisals of the assets transferred
to the FLP should be avoided, as they tend to limit the size of any discount
claimed.
e. None of the above.
2360. CHAPTER
19—FAMILY TAX PLANNING Question MC #18
In 2011, Valerie made a gift of stock (basis of $113,000; fair market value of
$413,000) to her grandson, Ryan. As a result of the transfer, Valerie paid a
gift tax of $20,000. Ryan’s income tax basis in the stock is:
a.
$118,000 for gain or loss.
b. $128,000 for gain and $113,000 for
loss.
c. $128,000 for gain or loss.
d. $133,000 for gain or loss.
e. None of the above.
2361. CHAPTER
19—FAMILY TAX PLANNING Question MC #19
In 2011, Pam makes a gift of land (basis of $313,000; fair market value of
$913,000) to her granddaughter, Tracy. As a result of the transfer, Pam paid a
gift tax of $45,000. Tracy’s income tax basis in the land is:
a.
$358,000.
b. $343,000.
c. $328,000.
d. $313,000.
e. None of the above.
2362. CHAPTER
19—FAMILY TAX PLANNING Question MC #20
In 2011, Arlene makes a gift of stock (basis of $813,000; fair market value of
$413,000) to her mother, Elizabeth. As a result of the transfer, Arlene paid a
gift tax of $60,000. Elizabeth’s income tax basis in the stock is:
a. $413,000 basis for gain and loss.
b. $443,000 basis for gain and loss.
c. $813,000 basis for gain and $413,000 basis
for loss.
d. $843,000 basis for gain and loss.
e. None of the above.
