CANNON TRUST SCHOOL 1 EXAM QUESTIONS AND ANSWERS
Your client owns a $200,000 home in joint tenancy, a $15,000 car in his own name, an $8,000 CD in his
name alone, and a $100,000-life insurance policy with a cash value of $10,000, payable to his wife. What
is the value of his probate estate?
- $23,000
- $33,000
- $223,000
- $333,000 - CORRECT ANSWER✅✅$23,000
A simple trust earned $27,000 in dividends. It paid $4,000 in trustee fees, one-half
from income and one-half from principal. Trust accounting income is which of the following?
- $0
- $23,000
- $25,000
- $27,000 - CORRECT ANSWER✅✅$25,000
If the Trust Document is silent with respect to a certain cash transaction, the Trust Administrator should
first look to which of the following for guidance?
- Court of Jurisdiction
- Principal and Income Law of the State
- Grantor
- OCC - CORRECT ANSWER✅✅Principal and Income Law of the State
When determining a long-term sustainable rate of return for a unitrust payout, which of the following
best represents the range of high confidence payout percentages?
- 1-2%
- 2-3%
- 3-5%
- 120% of the federal midterm rate - CORRECT ANSWER✅✅3-5%
,Which of the following is an example of tangible personal property?
- Gold bar
- Common stock certificate
- Patent
- Vacant land - CORRECT ANSWER✅✅Gold bar
Which of the following is an example of tangible personal property?
- Family residence
- IBM stock
- Jewelry
- Rental house - CORRECT ANSWER✅✅Jewelry
A to B for life, then to C. Following this transfer, which of the following is true?
- A has a fee simple interest.
- B has a reversionary interest.
- C has a remainder interest.
- C has a life estate. - CORRECT ANSWER✅✅C has a remainder interest.
Under joint tenants with rights of survivorship, when one tenant dies which of the following best
describes the result?
- Her share passes through her will to her heirs.
- Her share passes by law to her heirs, not through her will.
- Her share passes to the surviving joint tenant regardless of what her will says.
- The asset must be sold and the estate gets 1/2 of the proceeds. - CORRECT ANSWER✅✅Her share
passes to the surviving joint tenant regardless of what her will says.
A decedent owns $400,000 in his own name, a $200,000 home in joint tenancy with his spouse and a
$100,000 life insurance policy with the children as beneficiaries. Which of the following is the amount
passing through probate?
,- 0.
- $400,000.
- $500,000.
- $700,000. - CORRECT ANSWER✅✅$400,000
In cutting down a tree, which of the following occurs?
- Real property is converted to personal property.
- Personal property is converted to real property.
- Real property is converted to a fixture.
- There is no conversion, the tree remains real property. - CORRECT ANSWER✅✅Real property is
converted to personal property.
Which of the following transfers are includable in the gross estate of the donor if made within 3 years of
death?
- Gift of $8,000 cash value life insurance policy to son.
- Gift of $9,800 cash to daughter.
- Gift of $10,000 cash to friend.
- Gift of $5,000 stock in a closely held company to parent. - CORRECT ANSWER✅✅Gift of $8,000 cash
value life insurance policy to son.
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?
- Funeral expenses.
- Medical expenses relating to the decedent's last illness.
- Court costs in probating the estate.
- Executor's administration expenses. - CORRECT ANSWER✅✅Medical expenses relating to the
decedent's last illness.
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?
- $800,000
- $3,000,000
- $3,800,000
- $4,600,000 - CORRECT ANSWER✅✅$3,800,000
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?
- None. There is no marital deduction for assets passing to a non-citizen spouse.
- $100,000 as indexed.
- The basic exclusion amount as indexed.
- Unlimited since the decedent is a U.S. citizen. - CORRECT ANSWER✅✅None. There is no marital
deduction for assets passing to a non-citizen spouse.
How are death benefits from a life insurance policy, in which the decedent held incidents of ownership,
regarded for tax purposes?
Not subject to federal income tax.
Not subject to federal estate tax.
Subject to both federal income and estate tax.
Not subject to either the federal income or estate tax. - CORRECT ANSWER✅✅Not subject to federal
income tax.
An insurance policy on the life of a decedent is NOT included in his estate if the policy
was:
Your client owns a $200,000 home in joint tenancy, a $15,000 car in his own name, an $8,000 CD in his
name alone, and a $100,000-life insurance policy with a cash value of $10,000, payable to his wife. What
is the value of his probate estate?
- $23,000
- $33,000
- $223,000
- $333,000 - CORRECT ANSWER✅✅$23,000
A simple trust earned $27,000 in dividends. It paid $4,000 in trustee fees, one-half
from income and one-half from principal. Trust accounting income is which of the following?
- $0
- $23,000
- $25,000
- $27,000 - CORRECT ANSWER✅✅$25,000
If the Trust Document is silent with respect to a certain cash transaction, the Trust Administrator should
first look to which of the following for guidance?
- Court of Jurisdiction
- Principal and Income Law of the State
- Grantor
- OCC - CORRECT ANSWER✅✅Principal and Income Law of the State
When determining a long-term sustainable rate of return for a unitrust payout, which of the following
best represents the range of high confidence payout percentages?
- 1-2%
- 2-3%
- 3-5%
- 120% of the federal midterm rate - CORRECT ANSWER✅✅3-5%
,Which of the following is an example of tangible personal property?
- Gold bar
- Common stock certificate
- Patent
- Vacant land - CORRECT ANSWER✅✅Gold bar
Which of the following is an example of tangible personal property?
- Family residence
- IBM stock
- Jewelry
- Rental house - CORRECT ANSWER✅✅Jewelry
A to B for life, then to C. Following this transfer, which of the following is true?
- A has a fee simple interest.
- B has a reversionary interest.
- C has a remainder interest.
- C has a life estate. - CORRECT ANSWER✅✅C has a remainder interest.
Under joint tenants with rights of survivorship, when one tenant dies which of the following best
describes the result?
- Her share passes through her will to her heirs.
- Her share passes by law to her heirs, not through her will.
- Her share passes to the surviving joint tenant regardless of what her will says.
- The asset must be sold and the estate gets 1/2 of the proceeds. - CORRECT ANSWER✅✅Her share
passes to the surviving joint tenant regardless of what her will says.
A decedent owns $400,000 in his own name, a $200,000 home in joint tenancy with his spouse and a
$100,000 life insurance policy with the children as beneficiaries. Which of the following is the amount
passing through probate?
,- 0.
- $400,000.
- $500,000.
- $700,000. - CORRECT ANSWER✅✅$400,000
In cutting down a tree, which of the following occurs?
- Real property is converted to personal property.
- Personal property is converted to real property.
- Real property is converted to a fixture.
- There is no conversion, the tree remains real property. - CORRECT ANSWER✅✅Real property is
converted to personal property.
Which of the following transfers are includable in the gross estate of the donor if made within 3 years of
death?
- Gift of $8,000 cash value life insurance policy to son.
- Gift of $9,800 cash to daughter.
- Gift of $10,000 cash to friend.
- Gift of $5,000 stock in a closely held company to parent. - CORRECT ANSWER✅✅Gift of $8,000 cash
value life insurance policy to son.
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?
- Funeral expenses.
- Medical expenses relating to the decedent's last illness.
- Court costs in probating the estate.
- Executor's administration expenses. - CORRECT ANSWER✅✅Medical expenses relating to the
decedent's last illness.
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?
- $800,000
- $3,000,000
- $3,800,000
- $4,600,000 - CORRECT ANSWER✅✅$3,800,000
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?
- None. There is no marital deduction for assets passing to a non-citizen spouse.
- $100,000 as indexed.
- The basic exclusion amount as indexed.
- Unlimited since the decedent is a U.S. citizen. - CORRECT ANSWER✅✅None. There is no marital
deduction for assets passing to a non-citizen spouse.
How are death benefits from a life insurance policy, in which the decedent held incidents of ownership,
regarded for tax purposes?
Not subject to federal income tax.
Not subject to federal estate tax.
Subject to both federal income and estate tax.
Not subject to either the federal income or estate tax. - CORRECT ANSWER✅✅Not subject to federal
income tax.
An insurance policy on the life of a decedent is NOT included in his estate if the policy
was:
