In 1985,Drew Creates a Trust with $1,000,000 of Securities

question 124

Multiple Choice

In 1985,Drew creates a trust with $1,000,000 of securities.Under the terms of the trust,Paula (Drew's wife) is granted a life estate with remainder to their children.Drew makes a QTIP election as to the trust.Drew dies in 1992 when the trust is worth $1,500,000,and Paula dies in 2015 when the trust is worth $2,000,000.Which,if any,of the following is a correct statement?

• A)The trust is included in Drew's gross estate when he dies in 1992.
• B)None of the trust is included in Paula's gross estate when she dies in 2015.
• C)Drew does not get a marital deduction in 1985.
• D)All of the value of the trust ($2,000,000) is included in Paula's gross estate when she dies in 2015.
• E)None of the above.

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Definitions:

Inventory Turnover

A ratio showing how many times a company sells and replaces its stock of goods within a certain period.

Common Stockholders' Equity

The portion of equity ownership in a corporation held by common stock investors, reflecting their claim on the company's assets.

Asset Turnover

A financial ratio that measures the efficiency of a company's use of its assets to generate sales revenue.

Profit Margin

A financial ratio that measures the amount of net income earned with each dollar of sales by comparing profit to revenue.