Which of the following statements concerning the taxation of estates and trusts is (are) correct?

1.

They are taxed similarly to partnership entities.

2.

They are taxed on distributable net income (DNI) that is retained.

A. 1 only

B. Both 1 and 2

C. Neither 1 nor 2

D. 2 only

Which of the following terms applies to the blending together of separate and community properties of spouses in community-property states?

A. Proration

B. Inception

C. Commingling

D. Transmutation

Which of the following acts by a person other than a lawyer is clearly an unauthorized practice of law?

A. A sister drafts a will for her brother using printed forms.

B. A CLU explains to a client how a life insurance policy may solve estate liquidity needs.

C. A CPA designs an estate plan for presentation to a client.

D. A trust officer gives a client advice about the taxation of a trust.

Which of the following types of partial interests in property may be allowed a charitable deduction for estate tax purposes?

1.

A remainder interest in the donor vacation home

2.

A testamentary gift of a percentage of a decedent entire interest in property held in trust

A. Both 1 and 2

B. Neither 1 nor 2

C. 1 only

D. 2 only

In all cases a trustee must invest trust assets in accordance with the

A. common law standard of the prudent person

B. stated provisions of the trust instrument

C. requirements of a state's permissive legal list

D. requirements of a state's mandatory legal list

Which of the following statements concerning marital transfers to a non-U.S. citizen spouse is (are) correct?

1.

A marital deduction is automatically available as long as property is transferred outright to the non-citizen spouse.

2.

A marital deduction is automatically available if the transferor-decedent spouse is a U. S. citizen.

A. 1 only

B. Neither 1 nor 2

C. 2 only

D. Both 1 and 2

All the following powers held by the grantor of an irrevocable trust will cause the trust assets to be brought back into the estate of the grantor EXCEPT the power to

A. terminate the trust

B. add principal to the trust

C. designate who shall enjoy the trust income

D. change the trust remainderpersons

A single man with substantial assets and income is supporting his 80-year-old partially senile mother with monthly cash gifts. He is trying to find a practical way to support his mother while at the same time saving federal gift and income taxes without giving up ultimate control of any assets. Which of the following courses of action will best accomplish these objectives?

A. Make her a gift of enough corporate bonds from his portfolio so that she will be able to support herself from the interest payments

B. Make her annual gifts of enough interest income from the tax free municipal bonds in his portfolio so that she will be able to support herself

C. Purchase corporate bonds that pay interest in an amount sufficient for her to support herself and assign the interest payments to her

D. Make her an interest free loan with a principal amount large enough to produce sufficient income for her support when invested in corporate bonds

A woman is the income beneficiary of an irrevocable trust. All the following powers held by her will cause all the assets in the trust to be includible in her gross estate for federal estate tax purposes EXCEPT

A. the power to direct the trustee to distribute trust corpus to her

B. the testamentary special or limited power to direct the trustee to distribute trust assets to her children

C. the testamentary power to direct the trustee to pay trust assets to her estate

D. the testamentary power to direct the trustee to use trust assets to pay her estate taxes

Which of the following statements concerning property is (are) correct?

1.

A mortgage on real estate is real property.

2.

A tree growing on land is real property.

A. Both 1 and 2

B. Neither 1 nor 2

C. 1 only

D. 2 only