In a Grantor-Retained Annuity Trust (GRAT)

question 161

Multiple Choice

In a grantor-retained annuity trust (GRAT) ,

• A) there is an attempt to minimize taxes on a family by creating two classes of stock-preferred stock, whose value is locked in, and common stock, whose value reflects the market value of the business.
• B) a business owner can pass on up to $10,000 annually which is exempt from federal gift taxes.
• C) the grantor retains the voting power and interest income from the stock in the trust for up to ten years before the business goes to the beneficiaries.
• D) the surviving owner or heir of a family business has the right to purchase the stock of the deceased owner at a price established by a predetermined formula.

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Definitions:

Revenue Test

A criterion used to determine the effectiveness of a business's ability to generate income.

Total Amount

The complete sum or quantity calculated by adding together all the individual components or values.

Revenues

The total amount of income generated by the sale of goods or services related to a company's primary operations.

Reportable Segment

A part of an organization that engages in business activities from which it may earn revenues and incur expenses, and whose operating results are regularly reviewed by the organization's chief operating decision maker.