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Exam 20: Income Taxation of Trusts and Estates

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Question 71

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The IRS encourages ____________________ (paper, electronic, composite) filing for Forms 1041.

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Question 72

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The interest income of a trust usually is allocable to ____________________ (income, remainder) beneficiaries.

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Question 73

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Entity accounting income is controlled by the terms of the ____________________ for an estate or the ____________________ for a trust.

Judy can claim one-third of the Sweet Estate's cost recovery deductions, because she received one-third of the fiduciary's distributable net income (DNI).

List and discuss the three major functions of distributable net income (DNI) as that amount is used under Federal income tax law.

The Whitmer Trust operates a manufacturing business and distributes the profits to its income beneficiaries. Whitmer also passes through to the income beneficiaries the data needed to compute their domestic production activities deduction.

Generally, an estate's taxable income is computed in a manner similar to that used for a(n) ____________________.

Income beneficiary Molly wants to receive all of the municipal bond interest income of the Brenner Trust. A special allocation of this sort must be supported by a non-tax ____________________.

A fiduciary entity computes its alternative minimum tax in a manner similar to that used for a(n) ____________________.

The Testa Trust was terminated this year and Chip, the beneficiary of the corpus, received all of the trust assets. The trust reported a $10,000 net operating loss for the current tax year; this was the only tax year in which the trust operated a business. Testa has one income beneficiary, Flo. As a result of these transactions:

This year, the Nano Trust reported $50,000 entity accounting income and $40,000 distributable net income (DNI) . Nano distributed $60,000 cash to Horatio, its sole income beneficiary. Nano is a simple trust. Nano's distribution deduction is:

Usually, a beneficiary takes a carryover basis when a trust distributes a non-cash asset.

When the Holloway Trust terminated this year, it held a $1 million NOL carryforward. How is the loss carryforward treated? Does it expire with the trust or can another taxpayer use it? Be specific.

The Philmore Estate is subject to a 40% Federal estate tax rate and a 45% Federal and state income tax rate. Generally, an administrative expense should be claimed on the estate's income tax return.

The Yan Estate is your client, as are many of the decedent's family members. Determine the tax effects of the indicated losses for the Yan Estate for both tax years. The estate holds a variety of investment assets, which it received from the decedent, Mrs. Yan. The estate's sole income and remainder beneficiary is Yan, Jr.

Income beneficiary Turk received $30,000 from the Urgent Trust. Trust accounting income for the year was $100,000. The trust generated $20,000 in cost recovery deductions. How much can Turk deduct with respect to the cost recovery deductions that Urgent generated?