Martin Transfers Stock to an Irrevocable Trust and Names Himself

question 105

Multiple Choice

Martin transfers stock to an irrevocable trust and names himself to receive the trust income for life with the remainder interest gifted to his son. When Martin dies

• A)none of the stock will be included in Martin's estate.
• B)the stock's value at the time of transfer to the trust will be included in Martin's estate.
• C)the value of the stock less the present value of the income receivable by Martin will be included in Martin's estate.
• D)the value of the stock at death will be included in Martin's estate.

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Definitions:

Pretax Income

The amount of income earned by a business before paying taxes, also known as earnings before tax (EBT).

Overstated

When figures or amounts are reported higher than they actually are, potentially misrepresenting the financial condition of a business.

Inventory Accounting Methods

Different approaches to valuing and managing inventory, including FIFO (First In, First Out), LIFO (Last In, First Out), and weighted average cost.

FIFO Reserve

The difference between the cost of inventory calculated using the First In, First Out (FIFO) method and another inventory costing method.