Friday, May 3, 2024
Difficult Property Gifts

5.3.2 Basic Quiz -- Exceptions to Excess Business Holdings
It is possible to transfer all of the C corporation stock in a family business to a charitable remainder trust (CRT) without triggering the excess business holdings rule if the stock is sold within five years.
     True      False
Partnerships and LLCs are not subject to the excess business holdings (EBH) rule.
     True      False
A CRT can hold all of the stock in a business interest that produces active income for a term of five years before the excess business holdings rule will apply.
     True      False
Private foundations cannot use the five-year grace period.
     True      False
If a business interest is gifted to a private foundation, the five-year exception does not apply and the 10% penalty tax is immediately imposed.
     True      False
The five-year grace period begins to run on the date a buyer is found for the business.
     True      False
At the end of the five-year grace period, the private foundation or CRT is subject to the 10% penalty tax if it has not divested itself of the excess business holdings interest and has not been granted an extension.
     True      False
In her living trust, Daphne left her business, Scooby Snacks, Inc. to Mysterious Machines, an exempt private foundation. The foundation has held the property for five years and one day. If the foundation divests itself of the business interest anytime before the conclusion of year six, the excess business holdings rule will not apply.
     True      False
A private foundation may request an extension of the five-year period to sell the business interest.
     True      False
In order to receive an extension, the foundation or trustee must demonstrate that diligent efforts were made to sell the business interest at a reasonable price.
     True      False



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