2343. CHAPTER 19—FAMILY TAX PLANNING Question MC #1 Which if any of the following statements reflects the correct tax valuation rules? a. The geographical location of the property is relevant. b. The value of a note receivable is its face amount. c. Sentimental value should be considered. d. Values listed in the classified section of the newspaper are not representative. e. None of the above. 2344. CHAPTER 19—FAMILY TAX PLANNING Question MC #2 At the time of her death in 2011 Corinne owned stock in Gray Corporation. The stock is traded on a local exchange with the most recent selling prices as follows. Per Share Price Four trading days prior to Corinne’s death $100 Six trading days after Corinne’s death 120 Presuming no alternate valuation date election Corinne’s gross estate should include a per share value of: a. $120. b. $112. c. $110. d. $108. e. None of the above. 2345. CHAPTER 19—FAMILY TAX PLANNING Question MC #3 Which if any of the following factors should reduce the value of a note receivable included in the gross estate of the holder? a. The interest rate provided for is 9%. b. The note is not supported by collateral. c. The note is payable on demand. d. The note is forgiven by the decedent’s will. e. None of the above. 2346. CHAPTER 19—FAMILY TAX PLANNING Question MC #4 Which of the following independent statements correctly reflects the valuation rules applicable to estate and gift taxes? a. In valuing an annuity issued by Prudential Insurance Company use the tables issued by the IRS. b. In valuing an unmatured life insurance policy on which no further premiums need be paid use the policy’s interpolated terminal reserve amount. c. In valuing a note receivable the issuer’s bankruptcy should be taken into account. d. In valuing a used car use the trade-in value offered by a dealership as a down payment on a new model. e. None of the above statements is correct. 2347. CHAPTER 19—FAMILY TAX PLANNING Question MC #5 Which if any are characteristics of the valuation tables issued by the IRS? a. The IRS must issue new updated tables once a year. b. To determine the factor for a remainder interest subtract the life estate factor provided in the table from one. c. The same table that provides the factor for a life estate can be used to determine the value of an income interest for a term certain. d. To use the tables the Federal interest rate for the year of the transfer must be known. e. None of the above. 2348. CHAPTER 19—FAMILY TAX PLANNING Question MC #6 Which statement is correct concerning the rules governing the application of § 2032A (“special use” valuation)? a. The qualifying property subject to the election must include only real property. b. The qualifying heir of the property need not be a family member of the decedent. c. The election is available to the qualifying heir even if the decedent merely held the farm as an investment. d. In the event of recapture the additional estate taxes are imposed on the qualifyng heir. e. No correct answer is given above. 2349. CHAPTER 19—FAMILY TAX PLANNING Question MC #7 Which if any of the following statements correctly reflects the operational rules under § 2032A (“special use” valuation)? a. The § 2032A election is available for gift tax situations. b. The § 2032A election permits the valuation of qualifying property at its “most suitable” use value. c. In meeting the 50% test and 25% test the qualifying property is considered at its “best” use value. d. If § 2032A is elected only a sale of the qualifying property within the next 10 years will cause recapture. e. None of the above. 2350. CHAPTER 19—FAMILY TAX PLANNING Question MC #8 In 2011 Donna’s father dies and leaves her the family farm. The farm has a current use value of $4 000 000 and a best use value of $4 500 000. If the § 2032A election is made the farm should be included in the father’s gross estate at a value of: a. $1 000 000. b. $2 980 000 ($4 000 000 – $1 020 000). c. $3 480 000 ($4 500 000 – $1 020 000). d. $4 000 000. e. None of the above. 2351. CHAPTER 19—FAMILY TAX PLANNING Question MC #9 Which if any of the items listed below are valid factors utilized in valuing the stock in a closely held corporation? a. The company’s dividend-paying capacity. b. The nature of the business. c. The history of the company since its inception. d. The book value of the stock. e. All of the above. 2352. CHAPTER 19—FAMILY TAX PLANNING Question MC #10 At the time of his death Harvey was a shareholder in Grebe Corporation. In valuing the Grebe stock included in Harvey’s gross estate the IRS contends that the corporation possessed considerable goodwill. In disputing this contention which of the following point(s) is/are relevant? a. To provide financing Grebe has been obtaining its working capital from the shareholders at a below market rate of interest. b. The rate of return used by the IRS for the type of business involved is too high. c. Average net profit figures do not include large losses from unrelated investments. d. Harvey was not an employee of Grebe but was merely a passive investor. e. None of the above.
