FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 20: Income Taxation of Trusts and Estates

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 51

Multiple Choice

Review LaterAdd Note

Review Later

The Willis Trust instrument provides that Tamara, the sole income beneficiary, is to receive $40,000 annually. If trust accounting income is not sufficient to pay this amount, the Willis trustee is empowered to invade corpus to the extent necessary. During the current year, the trust reports distributable net income (DNI) of $100,000, including $30,000 of net tax-exempt interest. In accordance with the trust instrument, $40,000 is paid to Tamara. What is Tamara's gross income from the Willis Trust for the current year?

A) $100,000
B) $70,000
C) $40,000
D) $28,000

E) All of the above
F) A) and D)

Correct Answer

verified

Show Answer

Question 52

Multiple Choice

Review LaterAdd Note

Review Later

The Drabb Trust owns a plot of business-related land, basis of $50,000, fair market value of $35,000. Drabb is subject to a 35% marginal income tax rate. Its sole beneficiary, Eddie, is subject to a 15% marginal income tax rate. Drabb's current-year distributable net income is $95,000. What is the most preferable action for the trustee of Drabb to take, considering only the related tax consequences?

A) Distribute the land to Eddie and make a § 643(e) election.
B) Distribute the land to Eddie and make no § 643(e) election.
C) Sell the land to a third party.
D) Neither sell nor distribute the land.

E) B) and D)
F) A) and B)

Correct Answer

verified

Show Answer

Question 53

Short Answer

Review LaterAdd Note

A living trust is a revocable entity that is used to avoid ____________________ proceedings upon the death of the grantor.

Jose is subject to the top marginal Federal income tax rates. Carlita is considering establishing a trust in which Jose would be an income beneficiary. Considering only income tax consequences, Jose should be designated as:

A complex trust pays tax on the income that it accumulates (i.e., that it does not distribute).

The trustee of the Epsilon Trust distributed an asset to Telly, a qualifying income beneficiary. The asset's basis to the trust was $10,000, and its fair market value on the distribution date was $25,000. Which of the following statements is true?

For each of the following independent statements, choose the best answer. -In the year of termination, the entity's net operating loss carryovers are passed through to the beneficiaries.

Summarize the Federal income tax rules that apply to a trust or estate concerning the alternative minimum tax. Include comments about the applicable tax rates, and any personal exemption.

With respect to a trust, the terms creator, donor, and grantor are synonyms.

The Code defines a grantor trust as which of the following?

Generally, an administrative expense attributable to municipal bond interest should be claimed on the estate's Form 706.

When a trust operates a trade or business, it can claim a deduction for wages paid to employees.

The trust instrument indicates whether cost recovery is ____________________ to fiduciary accounting income, thereby reducing the amount of the distribution to the income beneficiary.

Your client Ming is a complex trust that operates exclusively in the U.S. Make a list of five or more tax planning opportunities that you might suggest to Ming.

Harry, the sole income beneficiary, received a $40,000 distribution from the Lucy Trust, in a year when the trust's distributable net income was $50,000. Harry's AGI can increase by as much as $50,000.

Consider the term distributable net income as it is used with respect to the Federal income taxation of trusts and estates. How is this amount computed? Where is it used in computing the parties' taxable incomes?

The Suarez Trust generated distributable net income (DNI) this year of $150,000, two-thirds of which was portfolio income, and the balance of which was exempt interest. Under the terms of the trust, Clara Suarez is to receive an annual income distribution of $30,000. At the discretion of the trustee, additional distributions can be made to Clara, or to Clark Suarez III. This year, the trustee's distributions to Clara totaled $60,000. Clark received $90,000. How much of the trust's DNI is assigned to Clark?

If provided for in the controlling agreement, a trust might terminate when the income beneficiary reaches age 35.

When a beneficiary receives a distribution from a trust of an asset other than cash, generally a(n) ____________________ basis is assigned to the asset.

Corpus, principal, and assets of the trust are synonyms.