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Exam 20: Income Taxation of Trusts and Estates

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Question 81

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The Chen Trust incurred the following items during the year. Taxable interest received $40,000 Tax-exempt interest received 60,000 Tax preparation fees paid 5,000 What is Chen's deduction for the tax preparation fees?

A) $0
B) $2,000
C) $3,000
D) $5,000

E) None of the above
F) A) and D)

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Question 82

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Every simple trust is allowed a $ personal exemption.

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Question 83

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

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 fiduciary assigns its tax credits to beneficiaries corresponding to the disposition of its income for the year.

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.

The Yellow Trust incurred $10,000 of portfolio income. Its corporate trustee paid fiduciary fees of $1,000 therefrom. Yellow's accounting income is distributed as follows. -$5,000 to income beneficiary Larry -$4,000 to pay part of the high school tuition bills for Carrie, the daughter of Yellow's grantor Marcia How much gross income does Marcia include with respect to these trust activities?

For each of the following independent statements, choose the best answer. e. Tax attribute of complex trusts only f. Tax attribute of estates only g. Tax attribute of estates and complex trusts h. Tax attribute of neither estates nor complex trusts -The entity's management generally is directed by the controlling document as to the date of the entity's termination.

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

Three weeks after Abed died, his brother Tony properly received Abed's last paycheck from his employer. The gross amount of the check was $4,000, and a $300 deduction for state income taxes was subtracted in computing the net amount of the payment. Which of the following statements is true?

When a trust distributes an in-kind asset with a realized loss, most likely this loss cannot be immediately deducted by the first-tier beneficiary.

Income is taxed to the creator of a(n) trust, instead of to the entity.

The Form 1041 of a calendar-year trust is due on 15 (not including extensions) of the following year.

For each of the following independent statements, choose the best answer. e. Tax attribute of complex trusts only f. Tax attribute of estates only g. Tax attribute of estates and complex trusts h. Tax attribute of neither estates nor complex trusts -The entity's AMT preferences and adjustments pass through to the income beneficiaries.

Reyes contributed assets to a trust, designating daughter Maria as the income beneficiary, and grandson Julio as the remainder beneficiary. This year, fiduciary accounting income was $50,000. The trustee accumulated $5,000 of this amount and added it to trust corpus. Reyes pays Federal income tax on $5,000 for the year.

Which of the following is a typical duty of a trustee?

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.

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.

With respect to a trust's timely filed Form 1041, the IRS will accept:

For each of the following independent statements, choose the best answer. e. Tax attribute of complex trusts only f. Tax attribute of estates only g. Tax attribute of estates and complex trusts h. Tax attribute of neither estates nor complex trusts -The entity was created by either a decedent or a living person.