Estate Tax: Comprehensive Learning Quizzes for Law and Government

Question 1

What is a unique feature of the federal estate tax?

Accepted Answer

It taxes the value of assets transferred after death.

Answer

It has higher tax rates for larger estates.

Answer

It only applies to estates over $10 million.

Answer

It is a state tax.

Question 2

Which of the following is NOT considered in calculating federal estate tax liability?

Accepted Answer

Decedent's age

Answer

Value of the estate's assets

Answer

Debts and expenses

Answer

Decedent's marital status

Question 3

What is the primary purpose of a generation-skipping transfer tax (GSTT)?

Accepted Answer

To prevent tax avoidance through asset transfers across generations

Answer

To ensure equal taxation of all estates

Answer

To provide tax relief for transfers to descendants

Question 4

What is a key distinction between federal estate tax and state inheritance taxes?

Accepted Answer

Federal estate tax is levied on the estate, while inheritance taxes are levied on beneficiaries

Answer

Federal estate tax offers a higher exemption amount compared to inheritance taxes

Answer

Federal estate tax is more complex than inheritance taxes

Question 5

Identify the significant milestones in the historical development of estate tax laws in the United States.

Accepted Answer

1916: The first federal estate tax is enacted.

Accepted Answer

1976: The Tax Reform Act of 1976 introduces the unified estate and gift tax.

Answer

1932: The Revenue Act of 1932 abolishes the federal estate tax.

Answer

1986: The Tax Reform Act of 1986 eliminates the generation-skipping transfer tax.

Question 6

In estate planning, which ethical principle obligates planners to prioritize their clients' well-being above their own?

Accepted Answer

Fiduciary duty

Answer

Confidentiality

Answer

Loyalty

Question 7

The Internal Revenue Service (IRS) is responsible for administering estate taxes at the federal level. True or False?

Accepted Answer

True

Answer

False

Question 8

Which of the following factors is NOT considered when determining the value of an estate for tax purposes?

Accepted Answer

Personal expenses incurred by the estate

Answer

Real estate owned by the deceased

Answer

Cash assets in bank accounts

Answer

Value of retirement accounts

Question 9

The purpose of a marital deduction in estate tax planning is to:

Accepted Answer

Reduce the taxable value of an estate by transferring assets to a surviving spouse

Answer

Increase the taxable value of an estate by transferring assets to a surviving spouse

Answer

Avoid estate taxes altogether

Answer

Create a trust for the benefit of children

Question 10

What is the key distinction between an estate tax and an inheritance tax?

Accepted Answer

An estate tax is imposed on the estate itself, while an inheritance tax is imposed on the beneficiaries

Answer

An inheritance tax is imposed on the estate itself, while an estate tax is imposed on the beneficiaries

Answer

There is no difference between an estate tax and an inheritance tax

Answer

An estate tax is imposed on the heirs of the deceased, while an inheritance tax is imposed on the executor of the estate

Question 11

The generation-skipping transfer tax (GSTT) is a tax imposed on:

Accepted Answer

Transfers of property to a person who is two or more generations below the transferor

Answer

Transfers of property to a person who is one generation below the transferor

Answer

Transfers of property between spouses

Answer

Transfers of property to a charity

Question 12

Which of the following events can trigger estate tax liability?

Accepted Answer

Both death and gifts exceeding the annual exclusion amount

Answer

Death

Answer

Gifts exceeding the annual exclusion amount

Answer

Sale of property

Question 13

What is the primary responsibility of an executor in estate tax planning?

Accepted Answer

To administer the estate, ensure tax compliance, and distribute assets according to the will

Answer

To challenge the validity of the will

Answer

To distribute the assets of the estate to the beneficiaries

Answer

To provide legal advice to the beneficiaries

Question 14

Which of the following events triggers the imposition of federal estate tax?

Accepted Answer

Transfer of property at death

Answer

Sale of property during lifetime

Answer

Receipt of a gift

Answer

Transfer of property to a trust

Question 15

What is the primary difference between the federal estate tax and state inheritance tax?

Accepted Answer

The federal estate tax is imposed on the estate, while the state inheritance tax is imposed on the beneficiaries.

Answer

The federal estate tax is imposed on the beneficiaries, while the state inheritance tax is imposed on the estate.

Answer

The federal estate tax is a progressive tax, while the state inheritance tax is a flat tax.

Answer

The state inheritance tax is a progressive tax, while the federal estate tax is a flat tax.

Question 16

What is the purpose of the marital deduction in estate tax law?

Accepted Answer

To reduce the taxable value of an estate by allowing for the transfer of property between spouses without incurring estate tax.

Answer

To increase the taxable value of an estate by allowing for the transfer of property between spouses with a higher tax rate.

Answer

To exempt certain types of property from estate tax, such as real estate and personal belongings.

Answer

To allow for the distribution of an estate to charitable organizations without incurring estate tax.

Question 17

Which of the following is NOT a factor considered when determining the value of an estate for estate tax purposes?

Accepted Answer

Income earned during the year of death

Answer

Appraisal of assets

Answer

Outstanding debts and expenses

Answer

Gifts made within the past three years

Question 18

What is the primary responsibility of an executor in estate administration?

Accepted Answer

To manage and distribute the assets of the estate in accordance with the will and legal requirements.

Answer

To prepare and file estate tax returns.

Answer

To represent the interests of the beneficiaries in court.

Answer

To contest the validity of the will.

Question 19

What is the purpose of generation-skipping transfer (GST) tax?

Accepted Answer

To impose a tax on transfers of property to individuals two or more generations below the transferor.

Answer

To impose a tax on transfers of property between spouses.

Answer

To impose a tax on transfers of property to charitable organizations.

Answer

To impose a tax on transfers of property to trusts.

Question 20

Which of the following is NOT an exemption from the federal estate tax?

Accepted Answer

State inheritance tax credit

Answer

Unified credit

Answer

Marital deduction

Answer

Charitable deduction

Question 21

How does the marital deduction impact the calculation of estate tax liability?

Accepted Answer

It reduces the value of the taxable estate by the amount of the deduction.

Answer

It increases the value of the taxable estate by the amount of the deduction.

Answer

It has no impact on the value of the taxable estate.

Answer

It only applies to estates with a surviving spouse.

Question 22

What is the primary purpose of the generation-skipping transfer tax (GST) in estate planning?

Accepted Answer

To prevent tax avoidance by transferring assets across generations

Answer

To apply only to estates above a certain value

Answer

To impose a fixed tax rate on all generation-skipping transfers

Answer

To eliminate the use of trusts in estate planning

Question 23

What is the primary purpose of the marital deduction in estate planning?

Accepted Answer

To reduce the taxable estate value by the value of property passing to a surviving spouse

Answer

To avoid estate taxes on all property passing to a surviving spouse

Answer

To defer the payment of estate taxes on property passing to a surviving spouse

Answer

To increase the taxable estate value by the value of property passing to a surviving spouse

Question 24

Which of the following is not a common estate planning technique used to minimize estate tax liability?

Accepted Answer

Investing in growth stocks

Answer

Establishing a living trust

Answer

Making charitable contributions

Answer

Purchasing whole life insurance

Question 25

What is the current federal estate tax exemption amount for 2023?

Accepted Answer

$12.92 million

Answer

$12.06 million

Answer

$11.7 million

Answer

$10.9 million

Question 26

Which of the following is NOT subject to federal estate tax?

Accepted Answer

Sale of personal effects

Answer

Transfer of property at death

Answer

Receipt of a retirement account

Answer

Gift to a charity

Question 27

What is the primary distinction between an estate tax and an inheritance tax?

Accepted Answer

An estate tax is levied on the deceased's estate, while an inheritance tax is levied on the beneficiaries.

Answer

An inheritance tax is levied on the deceased's estate, while an estate tax is levied on the beneficiaries.

Answer

There is no difference between an estate tax and an inheritance tax.

Answer

An estate tax is only applicable to federal estates, while an inheritance tax is applicable to state estates.

Question 28

Which of the following is NOT a factor considered when determining the value of an estate for tax purposes?

Accepted Answer

Income earned by the estate after death

Answer

Assets owned by the deceased at the time of death

Answer

Outstanding liabilities

Answer

Mortgages on real estate owned by the deceased

Question 29

Under state inheritance tax laws, which event typically triggers a taxable transfer?

Accepted Answer

The passing of property to beneficiaries upon the decedent's death

Answer

The sale of property by an estate

Answer

The creation of a revocable trust

Answer

The distribution of income from an estate

Question 30

What is the function of the Unified Credit in estate taxation?

Accepted Answer

It provides a dollar-for-dollar reduction in the taxable estate

Answer

It reduces the effective estate tax rate

Answer

It allows certain deductions and exemptions on the estate tax return

Question 31

Which of the following is an ineffective strategy for mitigating estate tax liability?

Accepted Answer

Purchasing term life insurance in the decedent's name

Answer

Establishing a revocable living trust

Answer

Making charitable contributions

Answer

Utilizing a disclaimer trust

Question 32

What is the purpose of the generation-skipping transfer tax (GSTT)?

Accepted Answer

To prevent avoidance of estate taxes by transferring wealth to subsequent generations

Answer

To tax transfers made more than one year after the transferor's death

Question 33

What is the fundamental distinction between a probate and a non-probate estate?

Accepted Answer

Probate estates undergo court administration while non-probate estates do not

Answer

Probate estates are larger in value than non-probate estates

Answer

Non-probate estates are subject to higher taxes than probate estates

Question 34

What is the primary responsibility of an executor of an estate?

Accepted Answer

To administer the estate and distribute its assets as directed by the decedent's will

Answer

To determine the estate's tax liability and file the estate tax return

Answer

To value the estate's assets and prepare an inventory

Question 35

Which of the following factors is NOT utilized in calculating the federal estate tax liability?

Accepted Answer

Age of the decedent

Answer

Value of the estate

Answer

State of residence of the decedent

Answer

Marital status of the decedent

Question 36

The unified credit against the federal estate tax primarily serves which purpose?

Accepted Answer

Reducing the taxable estate by a predefined amount

Answer

Offsetting state inheritance tax

Answer

Raising the tax rate applicable to large estates

Answer

Exempting specific property types from taxation

Question 37

What fundamental distinction exists between the federal estate tax and state inheritance taxes?

Accepted Answer

Federal estate tax is levied on the estate itself, while state inheritance taxes are imposed on individual beneficiaries receiving assets from the estate.

Answer

Federal estate tax exclusively targets large estates, whereas state inheritance taxes apply to all estates regardless of size.

Question 38

Under what circumstance is it mandatory to file a federal estate tax return?

Accepted Answer

When the value of the gross estate surpasses the applicable exclusion amount

Answer

When the decedent passed away without leaving a will

Answer

When the deceased individual was not a US citizen

Question 39

What is the primary objective of implementing a generation-skipping transfer tax (GST)?

Accepted Answer

Preventing the avoidance of estate taxes by transferring wealth across multiple generations

Answer

Funding educational programs

Answer

Encouraging charitable giving

Question 40

What is the primary impact of the marital deduction on the federal estate tax?

Accepted Answer

Reducing the taxable estate by the value of property transferred to a surviving spouse

Answer

Eliminating the need to file an estate tax return

Answer

Increasing the tax rate applicable to the estate

Question 41

Which factor does NOT affect the federal estate tax liability of a deceased individual?

Accepted Answer

Age

Answer

State of residence

Answer

Marital status

Answer

Value of the estate

Question 42

What is the primary objective of the generation-skipping transfer tax?

Accepted Answer

To prevent wealthy individuals from avoiding estate taxes by transferring assets to multiple generations.

Answer

To stimulate economic growth by encouraging investment in small businesses.

Question 43

What is the fundamental distinction between the federal estate tax and state inheritance taxes?

Accepted Answer

The federal estate tax is levied on the deceased individual's estate, while state inheritance taxes are imposed on the beneficiaries who receive assets from the estate.

Answer

The federal estate tax applies to all estates, whereas state inheritance taxes only apply to estates above a certain value threshold.

Question 44

What is a potential consequence of failing to pay the appropriate estate taxes?

Accepted Answer

Penalties and interest charges

Answer

Imprisonment

Answer

Loss of property

Question 45

What is the primary responsibility of an executor in the estate tax process?

Accepted Answer

To oversee the administration of the estate and ensure that all estate taxes are paid.

Answer

To determine the value of the estate's assets

Answer

To file the estate tax return

Question 46

Which event triggers the imposition of federal estate tax?

Accepted Answer

Death

Answer

Birth

Answer

Marriage

Question 47

What is the purpose of the marital deduction in estate taxation?

Accepted Answer

To minimize the estate tax liability for married couples by allowing the transfer of assets between spouses without incurring tax consequences.

Answer

To encourage charitable donations

Answer

To provide tax incentives for investments in small businesses

Question 48

Which of the following types of property is NOT included in the taxable estate?

Accepted Answer

Property held in a joint tenancy

Answer

Life insurance proceeds

Answer

Real estate

Answer

Personal property

Question 49

What is the current maximum federal estate tax rate?

Accepted Answer

40%

Answer

45%

Answer

50%

Answer

35%

Question 50

Which strategy is NOT commonly employed to reduce estate tax liability?

Accepted Answer

Investing in high-risk, high-return assets

Answer

Establishing a trust to hold assets

Answer

Making lifetime gifts to beneficiaries

Question 51

The federal estate tax exemption is currently set at what amount?

Accepted Answer

$12.92 million

Answer

$10 million

Answer

$5 million

Answer

$20 million

Question 52

What is the difference between an estate tax and an inheritance tax?

Accepted Answer

Estate tax is levied on the deceased's assets, while inheritance tax is levied on the beneficiary's share.

Answer

Estate tax is levied on real estate, while inheritance tax is levied on personal property.

Question 53

A person's estate includes all of the following EXCEPT:

Accepted Answer

Life insurance policies with a named beneficiary

Answer

Real estate holdings

Answer

Investments in stocks and bonds

Answer

Bank accounts

Question 54

Which of the following is NOT a factor that can impact the estate tax rate?

Accepted Answer

The beneficiary's income level

Answer

The nature of the assets in the estate

Answer

The size of the estate

Answer

The state of residence of the deceased

Question 55

A grantor trust is commonly used in estate planning to:

Accepted Answer

Transfer assets to beneficiaries while retaining some control during one's lifetime

Answer

Protect assets from creditors after death

Answer

Avoid all estate taxes

Question 56

What is the purpose of a living will?

Accepted Answer

To express one's wishes regarding medical treatment in the event of incapacitation

Answer

To specify the distribution of assets after death

Answer

To designate a power of attorney for financial matters

Question 57

Which of the following is an example of a charitable deduction that can reduce estate tax liability?

Accepted Answer

Donating a painting to a museum

Answer

Opening a joint bank account with a child

Answer

Investing in a Roth IRA

Answer

Gifting cash to a family member

Question 58

The process of proving the validity of a will in court is called:

Accepted Answer

Probate

Answer

Inheritance

Answer

Estate planning

Answer

Trust administration

Question 59

Which of the following statements about state inheritance taxes is TRUE?

Accepted Answer

Some states impose inheritance taxes on beneficiaries who receive inherited assets.

Answer

Inheritance taxes are always lower than federal estate taxes.

Answer

All states impose inheritance taxes.