In: Finance
Question 16
Which of the following are not desired tax advantages of a tax basis irrevocable trust?
A - Carryover basis
B - Step-up in basis
C - Marital deduction
D - Income shift
Question 17
Mr. Smith exchanges one life insurance policy on his life for another policy on his life. The exchange will qualify as an exchange under Internal Revenue Code section 1035. He has paid $80,000 in premiums over the years and the old policy is now worth $85,000 (without regard to any loans). Also, the old policy has an outstanding loan of $10,000. The new policy will be worth $75,000 and the loan from the old policy will be forgiven. How much will Mr. Smith be taxed on this exchange, assuming he holds the new policy until at least after the end of this year?
A - $0
B - $5,000
C - $10,000
D - $100,000
Question 18
For estate planning purposes, the definition of life insurance does not include which of the following?
A - Whole life contract
B - Tax-deferred annuity contract
C - Term contract
D - Single life contract
Question 19
Which of the following is true with respect to utilizing life insurance trusts for estate planning purposes?
A - I and II
B - I and III
C - II and III
D - III only
Question 20
Which of the following is a true statement concerning Crummey powers?
A - I only
B - I and II
C - I and III
D - III only
Question 16
B-Step-up in basis
Question 17
A Section 1035 exchange is a provision in the Internal Revenue Service (IRS)
allowing for tax free transfer of an existing annuity contract of life insurance so not tax is applicable.
A - $0
Question 18
B - Tax-deferred annuity contract
Question 19
B - I and III
Question 20
C - I and III