Wednesday, May 1, 2024
Difficult Property Gifts

5.3.3 Basic Quiz -- Lead Trusts and Excess Business Holdings
Lead trusts are exempt from the excess business holdings rule.
     True      False
Applying the excess business holdings rule to lead trusts prevents charitable organizations from receiving unrelated business income.
     True      False
If the excess business holdings rule did not apply to lead trusts, business owners would be able to run their business within the trust with payment of very little or possibly no taxes.
     True      False
If the charitable deduction for the value of the lead trust income interest is 60% or more, the excess business holdings rule does not apply to the lead trust.
     True      False
Ms. Marple placed the stock of her private investigation business into a charitable lead trust. Ms. Marple's charitable deduction equals 59.9%. The lead trust is subject to the excess business holdings penalty because the IRS rounds up percentages for application of the 10% penalty.
     True      False
Because a lead trust is a taxable trust, it cannot qualify for the 100% charitable deduction for the lead payments that are made to a charity.
     True      False
The five-year grace period for excess business holdings is not applied to charitable lead trusts.
     True      False
If a donor transfers all of the stock in his or her closely held corporation to a lead trust that will last for 4.99 years, the trust will not be subject to excess business holdings tax.
     True      False
If an LLC or a partnership that operates an active trade or business is transferred into a lead trust, the unrelated business income causes the lead trust to lose its 100% deduction for the lead payments to charity.
     True      False
A lead trust is a taxable entity.
     True      False



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