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Exam 28: Income Taxation of Trusts and Estates

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Question 31

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The Chen Trust is required to distribute its accounting income every year,one-half to Missy Chen,and one-half to the local church's homeless shelter.What is the Chen Trust's personal exemption?

A) $0
B) $100
C) $300
D) $600

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

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Question 32

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The Prakash Trust is required to pay its entire annual accounting income to beneficiaries Sam and Janet.The trust's personal exemption is:

A) $0.
B) $100.
C) $300.
D) $600.

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

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Question 33

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

The DaSinzi Estate has two equal income beneficiaries (Rollo and Luisa) and one remainder beneficiary (Coco).The estate operates a business and generates cost recovery deductions.Which taxpayer(s),if any,can deduct these items, e.g. ,the deceased,the estate,Rollo,Luisa,or Coco?

A trust might be used when a married couple is divorcing.

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 controlled by Federal-level probate laws.

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?

A complex trust automatically is exempt from the Federal AMT.

Does the estate or trust's distributable net income always equal its deduction for distributions to beneficiaries? Are the two amounts ever equal in amount? Answer for estates,simple trusts,and complex trusts.

For each of the following items, insert the best term or phrase. An answer choice may be used more than once, but only one choice is the best for each descriptive phrase. a.Complex b.Decedent c.Executor d.Grantor e.Living f.Reversionary g.Simple h.Sprinkling i.Trustee -A trust that can accumulate,rather than distribute,its accounting income.

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?

The unextended due date for a calendar-year trust to file its Form 1041 is March 15.

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:

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).

The Stratford Estate incurs a $25,000 legal fee in disposing of the real property of the decedent.The executor can decide to claim a $5,000 deduction against the Federal estate tax,and a $20,000 deduction on the estate's income tax return.

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?

In the year in which an estate terminates,its beneficiaries receive and can use as their own any unexpired NOL carryforwards,proportionate to the value of the corpus assets that they received.

For each of the following items, insert the best term or phrase. An answer choice may be used more than once, but only one choice is the best for each descriptive phrase. a.Complex b.Decedent c.Executor d.Grantor e.Living f.Reversionary g.Simple h.Sprinkling i.Trustee -The fiduciary in charge of an estate.

Beginning with its ____________________ tax year,an estate must remit quarterly Federal estimated income tax payments.

Your client Pryce is one of the income beneficiaries of the Santiago Trust.Pryce says to you,"I want all of the exempt interest income from Santiago to be allocated to me,as I am the income beneficiary who is subject to the highest marginal Federal income tax rate." How do you respond to Pryce's request?