This course is designed to provide practitioners with detailed information on what income in respect of a decedent is and how it is taxed. The course covers the income tax basis of property that constitutes income in respect of a decedent and a discussion of tax planning techniques to minimize the impact of income in respect of a decedent.
Test Results
Your Score:
80%
Passing Score:
80%
You passed.
1. At the death of Roger Stiles, a cash basis taxpayer, he owned corporate bonds on which the accrued interest amounted to $3,000. The estate tax payable after credits was $300,000. The bonds and interest were distributed to his grandson Timothy. The estate tax that would have been due without inclusion of the accrued bond interest would have been $298,800. As a result, Timothy will have a deduction for estate tax attributable to IRD of:
a.$1,200 as an offset to the bond interest income
b.$1,200 as an itemized deduction on Schedule A, subject to the two-percent floor
c.Zero, because there were no expenses connected with the bond interest income
XXXd.None of the above, because the estate tax is deductible as a miscellaneous itemized deduction not subject to the two-percent floor
Correct:
2. An accrual basis taxpayer died owning both accounts receivable and an installment obligation that was being reported under the installment method. Which of the following is correct?
a.Both of the assets constitute IRD.
b.Neither of the assets constitutes IRD.
c.Only the accounts receivable constitutes IRD.
d.Only the installment obligation constitutes IRD.
Incorrect:>> d
3. At her death on July 10, 2010, E. N. Vestor, a cash basis taxpayer, owned stock in X Corp., Y Corp., and Z Corp. X Corp. declared a dividend on June 10, date of record, July 5, and payable on July 20. Y Corp. declared a dividend on June 17, date of record, July 13, payable on August 1. Z Corp. declared a dividend on June 30, date of record, July 27, payable on August 15. The dividends payable to Vestor are $80, $110, and $140, respectively. The IRD from the above is:
a.Zero
XXb.$80
c.$190
d.$330
Correct:
4. Sean Saver died holding a qualified pension plan with a total value at death of $100,000. Sean had made nondeductible contributions to the plan of $8,000. His daughter Ramona took a lump-sum settlement of $104,000, the $4,000 representing income earned after Sean's death. As a result, Ramona has IRD of:
XXa.$104,000
b.$92,000
c.$96,000
d.Zero
Incorrect:>> b
5. Roberta Rivers established a Roth IRA in 2007. She died in 2010. At that time the total value of the IRA was $18,000, $2,000 of which was from earnings. Her son Rollin inherited the IRA in 2010, at which time it had a value of $18,500. As a result, Rollin has:
a.IRD of $18,000; ordinary income of $500
b.IRD of $18,500
XXc.IRD of $2,000; ordinary income of $500
d.IRD of $2,500
Correct:
6. At Roger Preston's death his traditional IRA had a value of $120,000. He had made nondeductible contributions of $25,000 to the IRA. His wife Paula inherited the IRA and rolled it over. At the time of rollover the IRA was worth $123,000. As a result, in the year of the rollover Paula has:
a.IRD of $120,000; ordinary income of $3,000
b.IRD of $95,000; ordinary income of $3,000
c.No IRD; ordinary income of $3,000
XXd.No income
Correct:
7. Which of the following is not IRD?
XXa.Raised calves of a cash basis operating farmer held at his death
b.Stored grain of a cash basis farm landlord held at his death
c.Accounts receivable of a cash basis operating farmer from the sale of hogs not delivered at the date of his death
d.Installment obligations held at the death of a cash basis farmer from the sale of farmland
Correct:
8. At Vera Vendor's death she held an installment obligation from the sale of land held for five years as an investment. The face amount of the installment obligation was $50,000; the cost percentage was 30 percent. Later in the same year Vendor's estate collected the installment as well as $3,000 of interest, $2,000 of which had accrued after her death. As a result, the estate has:
XXa.IRD taxed as long-term capital gain, $35,000; IRD taxed as ordinary income, $1,000; ordinary income, $2,000
b.IRD taxed as long-term capital gain, $35,000; IRD taxed as ordinary income, $3,000
c.IRD taxed as long-term capital gain, $50,000; IRD taxed as ordinary income, $1,000; ordinary income, $2,000
d.IRD taxed as long-term capital gain, $50,000; IRD taxed as ordinary income, $3,000
Correct:
9. I. B. Joiner, a cash basis, calendar year taxpayer, was a partner in the IJK partnership. He died on September 30, 2010. His death did not result in the termination of the partnership. His share of distributable earnings from the IJK partnership for the fiscal year ended June 30, 2010, was $30,000. His share of the partnership income for the fiscal year ended June 30, 2011, was $24,000. As a result, his final return and the estate income tax returns will show:
a.Final return, $0; estate tax returns, $36,000 of IRD and $18,000 of ordinary income
b.Final return, $0; estate tax returns, $30,000 of IRD and $24,000 of ordinary income
XXc.Final return, $30,000; estate tax returns, $6,000 of IRD and $18,000 of ordinary income
d.Final return, $36,000; estate tax returns, $18,000 of ordinary income
Correct:
10. Which of the following tax planning tactics is not possible with respect to IRD?
a.Changing the recipient of the IRD
b.Changing the timing of recognition of the IRD
CCc.Changing the character of the IRD (e.g., ordinary income to capital gains)
d.All of the above tactics are possible.
Correct: