Practice Test Geeks(CES) Certified Estate and Trust Specialist Practice Test
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Taxation of Estates & Trusts Flashcards

7 cards from real CES practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Taxation of Estates & Trusts flashcards as text

  1. What is a Qualified Terminable Interest Property (QTIP) trust's primary tax advantage?

    Answer: It qualifies for the marital deduction while allowing the first spouse to control ultimate distribution

    A QTIP trust qualifies for the unlimited marital deduction and defers estate tax, while the first spouse controls who receives assets at the surviving spouse's death.

  2. A decedent owned stock with a basis of $10,000 and FMV of $200,000 at death. What is the beneficiary's basis?

    Answer: $200,000 (stepped-up basis)

    Under IRC §1014, the beneficiary receives a stepped-up basis equal to the FMV at the decedent's date of death, eliminating the built-in gain.

  3. When does a step-DOWN in basis occur for inherited property?

    Answer: When the asset has declined in value below the decedent's original cost basis

    If the FMV of inherited property at death is lower than the decedent's basis, the beneficiary receives a stepped-down basis equal to the lower FMV.

  4. Which type of trust is NOT subject to the compressed trust income tax brackets because income is taxed directly to the grantor?

    Answer: Grantor trust

    A grantor trust's income is taxed directly to the grantor on their personal return, bypassing the compressed trust tax brackets entirely.

  5. A trust that is required to distribute all of its income currently and makes no corpus distributions is classified as:

    Answer: A simple trust

    A simple trust must distribute all current income, makes no principal distributions, and cannot make charitable contributions in the tax year.

  6. Under IRC §2032A, special use valuation allows farmland or closely held business real property to be valued at:

    Answer: Its actual use value rather than highest-and-best-use value

    Special use valuation under §2032A allows qualifying real property to be valued at its current use (e.g., farm use) rather than its highest-and-best-use FMV, reducing the taxable estate.

  7. What is the generation-skipping transfer (GST) tax designed to prevent?

    Answer: Wealthy families from avoiding estate tax by transferring assets to grandchildren or lower generations

    The GST tax imposes an additional tax when assets transfer to beneficiaries more than one generation below the transferor, closing a loophole that bypassed estate tax.