9. Utilizing a cross purchase business buy-out agreement, funded with life insurance: 1. increases estate taxes by increasing the value of the business by the decedent's proportionate share of the life insurance proceeds. 2. increases the surviving owners' basis. 3. allows an income tax deduction as a business expense for the annual insurance premiums. 4. requires more insurance policies than does an entity buy-out agreement if there are more than two owners. a. b. c. d. e. 10. a. 1, 2, and 4 only are correct. 2 and 4 only are correct. 1 and 3 only are correct. 4 only is correct. All are correct. Although the IRS and courts will carefully scrutinize and the IRS may challenge, Family Limited Partnerships (FLPs), if properly prepared, can in many cases provide which of the following benefits: Centralized management of family business activities. b. Protection from creditors of the limited partners. Transfer tax (estate and gift tax) savings due to discounts for lack of marketability and control. d. Creators (typically parents) can retain management control of the FLP assets if management is subject to appropriate fiduciary constraints and partnership formalities are carefully observed. All of the above. A qualified personal residence trust (QPRT) provides the grantor with substantial estate tax savings even if the grantor fails to survive the retained-interest term. True c. 11. 3 9. Utilizing a cross purchase business buy-out agreement, funded with life insurance: 1. increases estate taxes by increasing the value of the business by the decedent's proportionate share of the life insurance proceeds. 2. increases the surviving owners' basis. 3. allows an income tax deduction as a business expense for the annual insurance premiums. 4. requires more insurance policies than does an entity buy-out agreement if there are more than two owners. a. b. c. d. e. 10. a. 1, 2, and 4 only are correct. 2 and 4 only are correct. 1 and 3 only are correct. 4 only is correct. All are correct. Although the IRS and courts will carefully scrutinize and the IRS may challenge, Family Limited Partnerships (FLPs), if properly prepared, can in many cases provide which of the following benefits: Centralized management of family business activities. b. Protection from creditors of the limited partners. Transfer tax (estate and gift tax) savings due to discounts for lack of marketability and control. d. Creators (typically parents) can retain management control of the FLP assets if management is subject to appropriate fiduciary constraints and partnership formalities are carefully observed. All of the above. A qualified personal residence trust (QPRT) provides the grantor with substantial estate tax savings even if the grantor fails to survive the retained-interest term. True c. 11. 3