Cannon Trust School Level I Practice Exam

These questions are part of the practice quiz. Start practicing

• Which term describes a reduction of beneficiaries' shares when funds are insufficient to pay all?
• A testamentary general power of appointment has which tax consequences?
• Which of the following is a type of preferred stock that may be exchanged for common stock?
• Which term best describes ownership by two or more persons where, on the death of one owner, the share passes to the heirs rather than surviving owners?
• A client died on October 3. What is the income tax year end for his estate?
• What year option is available for a trust?
• A preferred stock that is entitled to dividends in arrears is known as:
• Which term describes a trust that is stated orally or in writing, with clearly prescribed terms?
• What is the effect of the 5x5 power on corpus?
• For Deena Decedent, how much income should be reported on her final Form 1040?
• Portability is now a permanent part of the estate tax law. Nonetheless, there are many advantages of A-B trust planning. Which of the following is NOT an advantage?
• This year a widow made the following transfers: $20,000 - grandson's college tuition, paid to the college directly. $18,000 - to the grandson directly for college books and dormitory fees. $32,000 - to the granddaughter directly for tuition at law school. What is the amount of her net taxable gifts for this year?
• Qtip stands for which of the following terms?
• Receipts representing shares of foreign stocks held on behalf of an investor by a U.S. financial institution are called:
• Which of the following is NOT a characteristic of a qualified domestic trust (QDT)?
• Which pair correctly identifies the two core duties of a fiduciary?
• In a partnership, what is the tax treatment of ordinary losses?
• If a trust earns capital gains and distributes $10,000 to beneficiaries in the same tax year, who gets taxed on the $10,000?
• Reducing reserve requirements is intended to:
• A qualified personal residence trust has which of the following results?
• Which of the following is a business valuation freeze technique?
• A QTIP trust does which of the following?
• What term describes an interest in property that will terminate or fail on the lapse of time or occurrence of a contingency?
• To qualify for the annual exclusion, it has to have a _______ interest.
• Which type of trust is used to preserve the unlimited marital deduction for a non-citizen surviving spouse?
• Property owned by both spouses in which each has an undivided one-half interest is called what?
• When determining a long-term sustainable unitrust payout, which range best represents high-confidence payout percentages?
• Power of _______ grants broad authority to act on behalf of principal in financial transactions
• Which of the following is NOT a general power of appointment?
• Which term is used for the total value of a decedent's property that must be included in the estate?
• Which estate planning tool uses the decedent's unused exemption to shelter assets from federal estate tax while allowing income or access to the surviving spouse?
• A trust stated orally or in writing, with the terms of the trust definitely prescribed.
• Which term describes property that can be touched, such as furniture?
• DNI stands for what?
• What term describes revoking a gift mentioned in a will by destruction or disposing of it before death?
• A provision allowing a married couple to treat a gift made by one of them to a third party as having been made one-half by each, provided it is consented to by the other on a Gift Tax return.
• Which transfer is includable in the donor's gross estate when made within 3 years of death?
• Which term best describes trusts that allow accumulation of income and discretionary distribution?
• In 2019, having made no prior gifts, Don began making annual gifts to his son of $55,000. What is the first tax year for which he will have to file a gift tax return?
• In the probate estate example, what is the value of the probate estate?
• In a power of attorney arrangement, the person on whose behalf the agent acts is called the ______.
• According to the material, which is NOT listed as one of the Federal Reserve's three main tools to regulate the economy?
• Which of the following is the most contractual, least fiduciary relationship?
• A trust funded with the applicable exclusion amount to avoid estate taxes is called a ______ shelter trust.
• An insurance policy on the life of a decedent is NOT included in his estate if the policy
• Which arrangement is a trust that operates during the grantor's lifetime?
• Which type of industry is considered cyclical?
• In a QTIP marital trust, the surviving spouse may be given various powers of appointment. Which of the following may be included for the surviving spouse to have maximum control available as a beneficiary of a QTIP while retaining election options for the executor?
• A will that is entirely in the handwriting of the testator.
• Which term describes stocks of companies whose earnings are less affected by the business cycle?
• An equal reduction of benefits to beneficiaries when an estate is not large enough to pay each beneficiary in full.
• Which form of co-ownership grants each owner an undivided share and allows heirs to inherit their share on death rather than passing to surviving owners?
• Which statement best describes per stirpes distribution?
• Appreciated assets donated to a public charity may be deducted from income up to which amount?
• Which item is NOT required for portability of the unused exemption to be available?
• Which factor generally determines which state's law governs the distribution of a decedent's estate?
• Which option is a trust form listed as a potential for annual exclusion gifts?
• ADRs are receipts representing shares of foreign stocks held on behalf of an investor by a U.S. financial institution are called:
• Which factor best describes the maximum exposure of a limited partner under typical LP arrangements if a claim arises?
• Under common law, trusts are presumed to be _________ unless the grantor revokes or the document allows revocation.
• When reporting a decedent's final income tax return (Form 1040), which income is included?
• The strengthening in the U.S. dollar in comparison to other currencies would have the effect of making which of the following true?
• Regarding a qualified disclaimer in a trust, can Fred make one to redirect distributions, and why?
• Which provision allows the holder to direct how and when trust assets are distributed to beneficiaries?
• Applicable law refers to which of the following?
• In the transfer 'A to B for life, then to C', which statement is true after the transfer?
• A client dies with assets in his own name. As executor of the estate, which of the following pieces of information is LEAST important to you?
• In a trust for the surviving spouse where the surviving spouse receives income for life and may appoint the remainder to any beneficiary including their estate, the inclusion of the trust in the gross estate at death is due to which power?
• What are the three types of general powers of appointment?
• Which statement about the taxation of a testamentary general power of appointment is true?
• Which statement correctly describes a calendar year for trusts?
• Which trust arrangement allows for annual gift tax exclusion through Crummey powers?
• In the portability era, which is NOT an advantage of A-B trust planning?
• The value at which estate property is included in the gross estate for Federal Estate Tax purposes.
• Your client has invested $100,000 in a limited partnership. If a claim of $1,000,000 arises, what is the maximum exposure?
• A Crummey power is a form of what type of power of appointment?
• A trust in which the grantor retains such power over the trust or is given such power over a trust that all items of income and deduction are attributed to the person rather than the trust.
• A widower wants to gift as much as possible to his three children without making taxable gifts and without using any of his applicable credit. What is the total amount he can give in 2022?
• Which of the following can be deducted either on the decedent's final 1040 income tax return or on the Form 706 Estate Tax return?
• A trust created by a written document is called which of the following?
• Which trust locks in the Generation Skipping Transfer Tax exemption and is not portable?
• Does a lifetime general power of appointment have income tax consequences?
• Which statement best describes a limited partner's liability in a typical limited partnership?
• Under joint tenancy with rights of survivorship, when one tenant dies, which description best matches the result?
• Property, property rights or interests transferred to another for less than adequate and full consideration in money or money's worth.
• In a simple trust that earned 27,000 in dividends and paid 4,000 in trustee fees (2,000 from income and 2,000 from principal), trust accounting income is which amount?
• A trust's income tax reporting begins at which event?
• In trust law, corpus refers to what?
• In a per stirpes distribution, where should a beneficiary’s share pass if they predecease the testator with living issue?
• A transfer tax imposed on a decedent's estate as such and not on the distributive shares is called.
• Has Keith lawfully revoked his will by tearing it up and dying before it was destroyed?
• Which term describes stocks of companies whose earnings grow faster than the general market?
• Interest rates rise and yields on money market instruments increase well above interest rates offered by banks. Investors, therefore, invest directly in the higher yielding instruments with funds they have withdrawn from banks. This is known as which of the following?
• The auto industry is considered which of the following?
• Which form is used for estate tax filings (Form 706)?
• Which form is designed for gifts to minors under 2503(c) provisions?
• When are estimated tax payments due for an estate?
• How often does Reg. 9 require that the trust department must have an audit?
• Which form is used to report the estate's fiduciary income tax return?
• The 5x5 power allows withdrawal of the greater of $5,000 or 5% of the trust corpus annually. From which source is the withdrawal made?
• Which value is used to determine the date-of-death valuation for individual assets in estate administration?
• Which of the following is an example of tangible personal property?
• In intestate succession, how are assets distributed when there is no surviving spouse?
• What term describes a person who holds legal title to property for the benefit of someone else?
• In a community property regime, each spouse has an undivided one-half interest in property acquired during marriage.
• A couple has a gross estate of $9,000,000 and hold all of their assets jointly. The first spouse dies leaving a surviving spouse and the executor timely files the 706 Estate Tax return to elect portability. What is the amount of Deceased Spousal Unused Exclusion available to the surviving spouse?
• A manager entrusted to control property of another and to act on behalf of and for the benefit of that individual
• The FMV of all QTIP property previously qualifying for the marital deduction is included in the surviving spouse's estate.
• Which is a fiduciary capacity?
• A trust document gives a beneficiary the noncumulative annual right to withdraw the greater of $5,000 or 5% of the value of trust corpus in any calendar year. The existence of a "5 by 5" power will cause which of the following tax implications?
• Which of the following is NOT a general power of appointment?
• A trust created by operation of law or by judicial construction to be distinguished from an express trust which is created by express language, oral or in writing.
• If no estate tax return is filed, which feature of the exemption is not permitted?
• The most important factor in the long-term performance of equity investments is:
• A trust created by a will and irrevocable by its nature is called what?
• Which of the following is an income tax benefit of a partnership form of business ownership?
• An interest that a person has in property which is enjoyed only during life.
• Revocable living trusts usually establish:
• An amendment or supplement to a will is called a ...
• Which tax return will NOT be affected by the payment made to Keith's estate?
• Which technique is identified as a wealth planning method to freeze the value of a business for transfer?
• Trusts that allow accumulation of income and distribute income on a discretionary basis.
• To activate portability, which action must the executor take?
• Which person is entitled to an estate after the prior estate has expired?
• What type of entity can elect a fiscal year for tax reporting?
• Intentionally _______ trusts are often used to get a lower tax result than a complex trust would have otherwise by taxing an individual rather than a trust.
• A trust established by the terms of a will.
• Which of the following scenarios does NOT qualify for the marital deduction?
• The opportunity to buy unissued common stock at a specified price, over a long period of time, is provided to the holder of a:
• The value used to include property in the gross estate for tax purposes is which of the following?
• The total value of all property in which a deceased had an interest and which must be included in his or her estate.
• Which provision is mentioned in conjunction with irrevocable trusts aimed at allowing present gifts for annual exclusions?
• ____ are valued at fair market value (FMV) on the date of transfer.
• Which statement is true regarding the tax treatment of a partnership according to the given material?
• Which statement describes a Grantor trust's tax treatment?
• How are death benefits from a life insurance policy, in which the decedent held incidents of ownership, regarded for tax purposes?
• Which type of trust is commonly revocable and is used to manage the grantor's affairs during incapacity?
• Which asset has a cash value inside it and is payable to a beneficiary, often not included in probate?
• Which statement about QDT tax withholding is true?
• What do you call a trust that is irrevocable by definition because the grantor created it under the provisions of a will?
• Which term describes property rights such as patents and trademarks that cannot be touched but have value?
• Revocable Living Trusts have all of the following features EXCEPT that they are:
• The postponed right of use or enjoyment of property is called what?
• Which of the following is NOT an accepted method of creating a QDOT?
• Which statement about a limited partner's liability is accurate in a standard LP structure?
• At common law, all trusts are _________ unless the power to revoke is in the document.
• Which of the following is considered an interested party in a trust or estate for accounting purposes?
• A trust that requires all income to be distributed on an annual basis.
• The postponed right of use or enjoyment of property is called what?
• Which BEST describes the level of expectation of standard of conduct for corporate fiduciaries?
• Ownership of property by two or more persons so that when one dies, the survivor (s) take the entire property.
• In the 18M estate scenario, how much goes into the Marital Trust?
• Distribution of assets in satisfaction of a Specific Bequest carries DNI to the recipient.
• If a Trust Document is silent on a cash transaction, which guide should the Trust Administrator consult first?
• Preferred stock which permits the owner to exchange it for common stock under set terms and conditions is:
• Crummey powers are a form of which type of power?
• Which of the following trusts can qualify for the marital deduction and allow the testator to control disposition of corpus after the surviving spouse's death?
• Elizabeth creates a revocable living trust and transfers her investment portfolio into the trust. The trust is for the sole benefit of Elizabeth for life and at her death the assets pass to her daughter, Sandra. Who is responsible for capital gains tax on gains realized during Elizabeth's lifetime?
• Distributable Net Income (DNI) is the maximum amount of income that can be treated as passed through and reportable to the beneficiaries in a given year.
• In the described estate, which amount passes through probate?
• Which term refers to a deduction allowed for gifts to a qualified charitable organization?
• What term describes the person nominated in a will and appointed by a court to settle the estate?
• A decrease in the money supply will:
• A deduction allowed for a gift to a qualified charitable organization is called?
• For a will stating “my estate to my issue, per stirpes,” which distribution is appropriate when S1 is a son, A and B are grandchildren by a deceased daughter, and C is a grandchild by a deceased son?
• Which term refers to the portion of a will that directs how assets are distributed?
• Cyclical changes in the business cycle would most likely have the greatest effect on which type of company?
• If you die without a valid will, which statement is true?
• Which describes land and the fixed improvements on it?
• Which feature allows a preferred stock to receive extra dividends beyond the fixed rate?
• Which of the following is NOT an advantage of the credit shelter portion of the A-B trust in the era of portability?
• Which term describes property rights such as patents that are non-physical but valuable?
• What is the function of the basic exclusion amount in estate tax planning?
• Which statement best describes the role of a QTIP trust in allowing the testator to control disposition of corpus after the surviving spouse's death?
• Which of the following is an example of tangible personal property?
• A trust that becomes operative during the lifetime of the settlor; opposed to a trust under will.
• Intentionally defective trusts are often used to achieve a lower tax result by taxing the individual rather than the trust.
• Which of the following would be an example of the use of fiscal policy to stimulate the economy?
• Crummey withdrawals require written notice to beneficiaries to withdraw. Which option is true?
• Which option is NOT one of the three types of general powers of appointment?
• When a member bank of the Federal Reserve System borrows from the Federal Reserve Bank in its district, it will pay the:
• Which investments represent ownership?
• A bequest is best described as what?
• Which statement describes a general power of appointment?
• Which of the following is NOT one of the three primary things to be examined before accepting an account?
• What is the most fundamental duty owed by the trustee to the beneficiary?
• Which of the following would be a direct result of monetary expansion by the central bank?
• Which of the following is TRUE of the taxation of an individual holding a testamentary general power of appointment?
• Which instrument is typically described as an equity security that grants ownership and may include voting rights?
• Which term refers to a trust created by the terms of a will?
• The instrument that authorizes one person to act for another in financial matters is called a
• What are the three responsibilities of a trustee?
• A trust is created for the surviving spouse of a decedent. Under the terms, the surviving spouse receives all net income for life and so much of the principal as needed for their support and at death may appoint the remainder to any beneficiary including their estate. When the surviving spouse dies, which of the following is the reason the trust is included in their gross estate?
• A person who creates a trust, such as a living trust, to become operative during his lifetime.
• What is a Crummey power?
• At the surviving spouse's death, the trust can distribute to children or named beneficiaries in a way that bypasses which tax?
• A client dies this year and leaves everything to their surviving spouse who is a U.S. citizen. The executor files a timely estate tax return and elects portability. What amount of Deceased Spousal Unused Exclusion will the surviving spouse have the right to use?
• What is the term for a terminable interest that qualifies for the marital deduction if the donor or executor elects?
• The Federal Reserve Board wishes to stimulate a sluggish economy, it would do so by doing which of the following?
• Which statement best describes when a trust's income tax reporting begins and the duration of its administration?
• Which of the following payments is treated as a gift tax-exempt when paid directly to an educational institution?
• Which asset in the example is held in joint tenancy and thus typically passes outside probate?
• Does a custodial agency have fiduciary capacity?
• The Uniform Prudent Investor Act incorporates which of the following?
• Which theory emphasizes diversification to optimize risk and return in an investment portfolio?
• A trust subject to estate tax in the decedent's estate that is funded with the applicable exclusion amount, thus producing no tax due.
• Which type of payment is typically exempt from gift tax when paid directly to an educational institution?
• In a tree-cutting scenario, which statement describes the effect on property?
• Which is an example of tangible personal property?
• Which trust type will NOT qualify as a gift of present interest for the annual exclusion?
• What are the two areas of duty for a fiduciary?
• Bypass Trust may lower the risk for hard to value assets.
• Which term best matches the following definition: An individual or a trust institution charged with the duty of acting for the benefit of another party as to matters within the scope of the relationship?
• Which term best describes property ownership where both spouses hold an undivided one-half interest in the asset?
• The Duty of _______ is the most fundamental duty owed by the trustee to the beneficiary.
• What percentage of the trust fees was charged to income in the given example?
• The most important factor in the short-term performance of equity investments is:
• In distributing an estate where all assets are in State A except a bank in State B, which state's law governs distribution?
• Which of the following is NOT required in a QTIP trust?
• To die without leaving a valid will.
• The trustee named has a duty to serve as trustee if which of the following is TRUE?
• Which option is a form of trust for minors?
• Which term is defined as the right to future possession that reverts to the grantor if a condition is not met?
• What is the best definition of a caveat in probate law?
• Which statement is true about sprinkling trusts?
• Property acquired during marriage in which both husband and wife have an undivided one-half interest.
• A will revocation scenario: has the will been revoked if a copy exists but the original is destroyed unintentionally?
• Which term describes a trust established by operation of law or by judicial construction rather than explicit language?
• What is the annual gift tax exclusion per recipient in 2022?
• Which type of trusts provide language to manage the grantor's affairs during incapacity?
• A United States citizen living in Canada, died and was survived by a spouse, who is a citizen of Canada. The estate valued at $18 million after expenses, passed to the surviving spouse outright. How much of the surviving spouse's interest qualifies for the marital deduction?
• Which statement about revocable living trusts is true?
• In a charitable remainder unitrust that pays 6% annually, the donor’s income tax charitable deduction is which of the following?
• Present interest is required to qualify for which tax exclusion?
• Which action completes the appointment of a trustee?
• What term refers to the powers that allow withdrawal or direction of distribution of funds held in trust?
• What term refers to a future interest that comes into existence after the termination of a prior interest?
• Ownership of property by two or more persons so that each has an undivided interest which at the death of one is passed by will to the deceased's heirs.
• Which term describes a trust in which the grantor retains power resulting in income attributed to the grantor?
• An unmarried client dies intestate with $400,000 in her own name and $100,000 in joint tenancy with survivorship with one of her four children. How are assets distributed?
• What term refers to the principal or capital of an estate, as distinguished from income?
• Which of the following does not qualify for purposes of the gift tax annual exclusion?
• Which term describes a future interest that returns to the grantor if the grantee's interest ends?
• What is the term for a trust that results in the grantor being taxed on the trust's income?
• Portability in estate planning refers to which concept?
• In the charitable remainder unitrust example, the annual payout of 6% is best described as a fixed percentage of what?
• Stocks that carry a stated, typically fixed, dividend rate are known as:
• Disintermediation occurs when investors withdraw funds from banks to invest directly in higher-yielding instruments. Which option best describes this concept?
• Under what condition is the unlimited marital deduction available?
• Which instrument provides ownership in a company and is commonly traded on exchanges?
• Which of the following is identified as a wealth planning tool to transfer business value through a payment plan rather than a single lump sum?
• Which term refers to the person named in a will to administer the estate?
• Who is entitled to receive benefits from a will, insurance policy, trust agreement or employee benefit plan?
• A client made lifetime taxable gifts of $800,000 ten years prior to her death. She had an estate worth $3,000,000 at death. The value of the property gifted during her lifetime is worth $1,600,000 at her death. On which of the following is her tentative tax figured prior to applying the applicable exclusion amount?
• The decedent spouse dies with $18,000,000 and leaves their estate into a marital and credit shelter trust with the standard optimum marital formula for her surviving spouse. She had made $3,000,000 in taxable gifts during life and dies when her Basic Exclusion amount is $10,000,000. How much goes into the Marital Trust?