Salmond Signs a Note for the Purpose of Lending Credit

question 46

Multiple Choice

Salmond signs a note for the purpose of lending credit to John. Salmond also makes his father Richard sign the note because of his shaky financial condition. This indicates that Richard has signed the note in the capacity of a(n) :

• A) drawee.
• B) accommodation party.
• C) drawer.
• D) indorser.

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Definitions:

Grantor Trust

A grantor trust is a legal entity in which the trust's creator maintains control over the assets and income, often leading to the income being taxed directly to the creator.

Federal Income Tax

The tax levied by the IRS on the annual earnings of individuals, corporations, trusts, and other legal entities.

Inter Vivos Trust

A legal arrangement where assets are transferred into a trust for the benefit of beneficiaries by the trustor during their lifetime.

Taxable Estate

The total value of an individual's estate that is considered when determining estate taxes, including all assets minus allowable deductions.