UNIVERSITY OF ILLINOIS AT URBANA CHAMPAIGN College of Business D E PAR T M E N T O F F I NAN C E Finance 230 Fall 2007 Assignment 11 Due November 30 2007 1 A man dies in 2007 with a gross estate of 4 000 000 His funeral expenses are 40 000 He leaves 2 000 000 to the American Red Cross Assume there are no other allowable deductions charitable gifts adjustable taxable gifts state estate tax credits previously paid estate and gift taxes or foreign death taxes Use the attached Unified Rate Schedule to determine the total Federal estate tax owed on his estate A D 0 1 600 000 B E 600 800 None of the above C 999 200 2 A married man dies in 2007 with a gross estate of 6 080 000 His funeral expenses are 80 000 He leaves 3 000 000 to his wife and 3 000 000 to his only son His wife dies later in 2007 with a gross estate of 3 000 000 Her funeral expenses are 50 000 and she leaves 2 950 000 to her son Assume there are no other allowable deductions charitable gifts adjustable taxable gifts state estate tax credits previously paid estate and gift taxes or foreign death taxes Use the attached Unified Rate Schedule to determine the total Federal estate tax owed on these two estates A D 0 2 439 100 B E 427 500 None of the above C 877 500 3 If you die without a valid will you have died A Intestate B Penniless D Without an estate E None of the above C Without a trust 4 Which type of trust can be used to reduce the administrative and legal costs of probating an estate A D Testamentary trust Purpose trust B E Inter vivos trust None of the above C Family incentive trust 5 Based on intermediate cost assumptions when is the HI trust fund expected to be exhausted A D 2015 2085 B E 2019 None of the above C 2041 6 You earn 5 880 during your summer 2007 internship and 590 working part time during December 2007 How many quarters of coverage under Social Security would you have earned in 2007 A D 0 6 B E 1 None of the above C 4 7 You are single and you earn 115 000 in 2007 What are the total Social Security taxes paid by both you and your employer A D 0 17 595 B E 7 712 50 None of the above C 15 425 8 Refer to the Summary of the 2007 Social Security and Medicare Trustees Report from the hyperlink on the class web page Which part s of Social Security and or Medicare is are projected to remain adequately financed into the indefinite future because the current law automatically provides financing each year to meet the next year s expected costs I OASDI II Medicare Part A HI III Medicare Part B SMI IV Medicare Part D Prescription Drug Coverage A D I Only III IV B E I II Only None of the above C II III only 9 Refer to the Summary of the 2007 Social Security and Medicare Trustees Report from the hyperlink on the class web page What percentage of an increase in the payroll tax to take effect immediately would be required Column A Column B Column C Column D to bring HI into actuarial balance Taxable amount Taxable amount Tax on amount in Rate of tax on excess over over the next over not over column A amount in column A 75 years Percent D 10 0 10 000 0 18 10 000 20 000 1 800 20 20 000 40 000 3 800 22 40 000 60 000 60 000 80 000 8 200 13 000 24 26 80 000 100 000 18 200 28 100 000 150 000 23 800 30 150 000 250 000 38 800 32 250 000 500 000 500 000 750 000 70 800 155 800 34 37 750 000 1 000 000 248 300 39 1 000 000 1 250 000 345 800 41 1 250 000 1 500 000 448 300 43 1 500 000 2 000 000 2 000 000 555 800 780 800 45 45 A 43 B 67 C 88 100 E None of the above According to Dennis Drent the guest speaker on November 2nd VPI is licensed in which of the following lines of the insurance industry A D Life Property Liability Table A Unified Rate Schedule B E Health C None of the above Reinsurance
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