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Exam 28: Income Taxation of Trusts and Estates

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Question 21

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A gift to charity from its 2015 income is deductible on an estate's Form 1041 if it is made by the end of the ____________________ (2015,2016) tax year.

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Question 22

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The Brighton Trust has distributable net income for the year of $100,000 and no income from tax-exempt sources.Under the terms of the trust instrument,the trustee is required to distribute $25,000 to Roger and $50,000 to Sally.After payment of these amounts,the trustee is empowered to make additional distributions at its discretion.Exercising this authority,the Brighton trustee distributes an additional $20,000 to Roger,and $30,000 to Sally.How much income from the trust must Sally recognize?

A) $80,000
B) $65,000
C) $50,000
D) $30,000

E) A) and B)
F) A) and C)

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Question 23

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

The Crown Trust distributed one-half of its accounting income to Lee this year.Lee also is allocated one-half of Crown's credit for building low-income housing.

One-fourth of the Cruger Estate's distributable net income consists of net long-term capital gains.Thus,when income beneficiary Susie receives a $40,000 income distribution from the estate,$10,000 of it qualifies for the 15%/20% tax rate.

The Circle Trust reports some exempt interest income for the year.How does this investment income affect Circle's deduction of its fiduciary fees? Charitable contributions?

The Doyle Trust reports distributable net income for the year of $100,000 and no income from tax-exempt sources.Under the terms of the trust instrument,the trustee must distribute $20,000 to Roger and $20,000 to Sally.After paying these amounts,the trustee is empowered to make additional distributions at its discretion.Exercising this authority,the trustee distributes an additional $25,000 to Roger and $50,000 to Sally.How much gross income from the trust must Roger recognize?

Beneficiary information concerning a trust's income and distributions are conveyed on Schedule ____________________ of the Form 1041.

The Malik Estate operates a manufacturing business.Malik made no income distributions this year.It can claim a domestic production activities deduction (DPAD).

List at least three non-tax reasons that you might suggest to your client Connie that she should consider shifting some income and assets to a trust.

Which of the following is a typical duty of an executor of an estate?

For each of the following independent statements, choose the best answer. a.Tax attribute of complex trusts only b.Tax attribute of estates only c.Tax attribute of estates and complex trusts d.Tax attribute of neither estates nor complex trusts -​The entity is an information-reporting,not a tax-paying,taxpayer.

Counsell is a simple trust that correctly uses the calendar year for tax purposes.Its income beneficiaries (Kathie,Lynn,Mark,and Norelle) are entitled to the trust's annual accounting income in shares of one-fourth each.For the current calendar year,the trust has ordinary business income of $40,000,a long-term capital gain of $20,000 (allocable to income),and a trustee commission expense of $4,000 (allocable to corpus).Use the format of Exhibit 20.5 in the text to address the following items. a.How much income is each beneficiary entitled to receive? b.What is the trust's DNI? c.What is the trust's taxable income? d.How much is taxed to each of the beneficiaries?

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

Tax planning motivations usually predominate over other objectives in deciding whether to create a trust.

When a beneficiary receives a distribution from a trust of an asset other than cash,the realized loss generally is ____________________ (recognized,not recognized) by the trust.

Tax professionals use the terms simple trust and complex trust when dealing with fiduciary arrangements.How does one know whether a trust is "simple" or "complex?" When is this determination made?

Identify the parties that are present when an estate is created,and their key duties.Then do the same for a trust.

The Griffin Trust makes a gift of long-term capital gain property to a qualifying charity.Griffin's entity-level deduction cannot exceed 30% of distributable net income.

The Moot Trust distributes an asset to its income beneficiary that shows a realized gain.What are the Federal income tax consequences of the distribution? What if the asset shows a realized loss?