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 71

Essay

Review LaterAdd Note

Review Later

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

Correct Answer

verified

∙ DNI determines the maximum amount that...

View Answer

Show Answer

Question 72

True/False

Review LaterAdd Note

Review Later

Trusts can select any Federal income tax year-end.

A) True
B) False

Correct Answer

verified

Show Answer

Question 73

True/False

Review LaterAdd Note

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

Corelle 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 incurs 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?

First-tier distributions allowed by the will or trust document are made at the discretion of the executor or trustee.

The tax rules regarding the income taxation of trusts and estates are included in which Subchapter of the Internal Revenue Code?

A fiduciary's distribution deduction shifts the tax burden for the distributed amount of current-year income from the entity to the beneficiary.

Distributable net income DNI) is the____________ maximum, minimum) amount that can be included in the beneficiaries' gross incomes from the fiduciary for the year.

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. -The fiduciary in charge of a trust.

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. -An estate always is created upon the death of this party.

The Chen Trust incurred the following items during the year. What is Chen's deduction for the tax preparation fees? $\begin{array}{lr}\text { Taxable interest received } & \$ 40,000 \\\text { Tax-exempt interest received } & 60,000 \\\text { Tax preparation fees paid } & 5,000\end{array}$

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

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

Under IRS regulations, the decedent's estate must terminate within four years of the date of death, to minimize income-shifting techniques.

A________ first-, second-, third-) tier distribution is one that the trust agreement requires to be made by the trustee to the income beneficiary.

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?

Every simple trust is allowed a $ _________personal exemption.

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

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. -The fiduciary in charge of an estate.

This year, the Suarez Trust generated distributable net income DNI) 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 Clara?