Insurance Strategies for Businesses – SELF DIRECTED FINAL EXAM (IL 6000112012) (2023)

Katherine Clark signs a non-qualified deferred compensation agreement with Inco Corporation. To informally fund this agreement, Inco wants to purchase a life insurance policy. Who should be the owner and beneficiary of the policy?

What is the name for a buy-sell agreement between a partnership and the individual partners?

Assume a limited partner contributes $10,000 to a partnership. There are two general partners. The partnership fails, and has liabilities of $100,000. What is the most the limited partner will lose?

All of the following are valid uses of a split-dollar arrangement EXCEPT which one?

Which of the following must be true if a business buy-sell agreement is to establish the value of the business for estate tax purposes?

Which method of determining the amount of a key employee life insurance policy is determined based on the difference between the key employee’s salary and the salary of someone hired to perform the key employee’s duties?

Which of the following is NOT a loss that is usually associated with the death of a key employee?

Business assets must always equal the sum of which two items?

What is the preferred solution to estate liquidity problems?

What is a disability buy-sell agreement where the business owns the disability policies called?

Which of the following must be met to qualify for a Section 303 redemption?

All of the following are true regarding the trigger date of a disability buy-sell agreement EXCEPT which one?

What problem of the classic split-dollar arrangement is aggravated by the employer-pay-all approach?

All of the following are benefits of including waiver of premium when a life insurance policy is used in a non-qualified deferred compensation arrangement EXCEPT which one?

What is the preferred way to fund a business buy-sell agreement?

To qualify for paying the estate tax attributable to the business interest in installments, the value of the business must exceed what percentage?

George dies in 2019 and leaves his entire $3,000,000 estate to his surviving spouse. What will George’s federal taxable estate be?

In key employee life insurance situations, who is the policy beneficiary?

All of the following are employer advantages of a typical non-qualified deferred compensation plan EXCEPT which one?

When is a cross-purchase agreement likely to have advantages over a stock redemption agreement?

Which of the following would not usually be considered a criterion in identifying a key employee?

In key employee life insurance situations, who is the policyowner?

Shareholders’ rights include which of the following?

Two stockholders enter into a cross-purchase agreement funded by life insurance. Which statement is true?

Congress has provided some relief from estate taxes by providing special-use valuation in situations involving real property used in what?

What shows the financial condition of a business over a period of time?

If there is no life insurance listed on a company’s balance sheet, all of the following are reasonable assumptions EXCEPT which one?

What is the maximum amount of stock that may be redeemed under Section 303?

All of the following are exempt transferees under the transfer-for-value rule EXCEPT which one?

In a partnership with three partners, how many life insurance policies are needed to fund a cross-purchase agreement?

All of the following are true with regard to borrowing the funds needed for a buy-sell agreement EXCEPT which one?

In a partnership with three partners, how many life insurance policies are needed to fund an entity buyout plan?

Which type of disability buy-out agreement allows for a step-up in the basis of the remaining owner’s business interest?

Of the following types of life insurance, which is generally preferable when funding a buy-sell agreement?

In the absence of a continuation agreement, whose death will result in the dissolution of a business?

What is the preferred way to fund a buy-sell agreement?

Gene and Judie are partners. Judie’s basis in the business is $30,000, and Gene’s basis is $70,000. Assume Gene purchased Judie’s shares for $300,000 under a cross-purchase agreement. What is Gene’s basis in the business now?

All of the following are methods for informally funding a non-qualified deferred compensation plan EXCEPT which one?

Which of the following is the least common form of business organization?

All of the following are likely financial consequences when the owner of a small business becomes ill and is unable to work for several months EXCEPT which one?

All of the following may be considered in determining the maximum amount of a Section 303 redemption EXCEPT which one?

Which statement is true of losses from a sole proprietorship?