1. “A” is in the 28% marginal income tax bracket. He acquired 400 shares of XYZ Inc. Common stock two years ago for $60,000, but the stock’s current market value is $45,000. “A” plans to give 200 shares of the stock to each of his two granddaughters. Rowena is age 19 and Susan is age 12. Under these circumstances, all of the following statements are correct EXCEPT:

A.    If “A” makes the gifts to the children, he will lose the tax benefit of the $15,000 loss available if he sold the stock.

B.    “A” can use the $14,000 annual exclusion for both stock gifts.

C.    If the grandchildren sell the stock immediately after receiving the stock, they both may take a loss based on “A’s” cost basis.

D.    If Rowena keeps her stock, any dividends will be taxable at her marginal income tax bracket.

E.    If Susan keeps her stock, any dividends in excess of $1,800 will be taxable at her parent’s marginal income tax bracket.

2. Which of the following statements correctly identify(ies) significant differences between UGMA and UTMA?

I. UGMA places no restrictions on types of property that may be transferred, whereas UTMA does place restrictions.

II. UGMA permits both lifetime and testamentary transfers, but UTMA permits only testamentary transfers.

A.      I only

B.        II only

C.       Both I and II

D.       Neither I nor II

3. Which of the following statements concerning the “gross-up” rule is (are) correct?

I. Income taxes paid in the year of death are includible in the deceased’s gross estate.

II. Gift taxes paid in the year of death are included in the deceased’s gross estate.

III. Life insurance given in the year prior to the year of death is excluded from the deceased’s gross estate.

A.      I only

B.      II only

C.     I and II only

D.     II and III only

4. All the following statements concerning the income, estate, and gift tax consequences of a gift to a 2503(c) trust for a minor are correct EXCEPT:

A. The income can be accumulated in the trust, but if the income exceeds $2,100 it is taxable to the minor at the parent’s marginal tax bracket.

B. The fair market value of the assets up to $14,000 can qualify for the gift tax annual exclusion.

C. The “throwback” rules do not apply to income accumulated before the minor reaches age 21.

D. Assets transferred to the trust are not includible in the donor’s gross estate for federal estate tax purposes if the donor is not the trustee.

5. A gift of a partial or future interest in property is generally nondeductible. However, there are specific exceptions. A current deduction is available for all the following contributions to a qualified organization EXCEPT:

A. The gift of a remainder interest in a personal residence or farm with the stipulation that the donor may continue to reside there for his or her lifetime.

B. The gift of a remainder interest in real property granted only for conservation purposes.

C. The gift of a remainder interest in tangible personal property with the stipulation that the donor may retain possession of the property during his or her lifetime.

D. The gift of a remainder interest in property where the donor retains an income interest, provided the gift is transferred in trust.