Estate_11th_Ch_12_MC_Solutions.pdf - ESTATE PLANNING 11TH...

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ESTATE PLANNING, 11TH ED. C HAPTER 12 E ND OF C HAPTER M ULTIPLE C HOICE S OLUTIONS 1. The correct answer is c. Generally, an estate does not need cash to pay the premiums on a life insurance policy for the decedent since the decedent is dead. All of the other options are reasons an estate will have liquidity concerns. 2. The correct answer is c. Any losses on the sale of the assets are income tax losses and are deductible on the estate’s income tax return, not on the estate tax return. All of the other answers are true statements. 3. The correct answer is b. Josh’s estate would have an adjusted basis in the 30% interest equal to 30% of the fair market value at Josh’s date of death, or $1,800,000. If the executor of Josh’s estate sold the interest for $2,500,000, the gain of $700,000 ($2,500,000-$1,800,000) would be subject to capital gains tax under Section 303 (only available at

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