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Exam 28: Income Taxation of Trusts and Estates

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Question 61

True/False

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Tax planning usually dictates that high-income and -wealth individuals be specified as first-tier beneficiaries of a trust arrangement.

A) True
B) False

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Question 62

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When DNI includes exempt interest income, the beneficiary includes less than the full amount of DNI in current-year gross income.

A) True
B) False

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Question 63

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To reduce trustee commissions, the Sigrid Trust is operated as though it were two trusts (i.e., with 70-year-old Grandma and 7-year old Skippy each holding equal shares) .This year the trust generated distributable net income (DNI) of $80,000.The Sigrid trustee distributed $100,000 to Grandma this year: $40,000 as her one-half share of the entity's income, and $60,000 as a distribution of principal.Skippy received no distribution. How much of the year's distributable net income is assigned to Grandma?

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

Remainder beneficiary Shelley receives a $50,000 net operating loss carryover when the Malone Trust terminates. Shelley deducts this amount ____________________ (for/from) AGI on her Form 1040.

The Purple Trust incurred the following items this year. Compute Purple's tentative minimum tax for the year.Purple does not have any credits available to reduce the AMT liability.

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

Estates and trusts can claim Federal income tax deductions for costs incurred in maintaining investments in U.S.state and local bonds.

The Ulrich 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 must distribute $60,000 to Roger and $60,000 to Sally.After paying these amounts, the trustee is empowered to make additional distributions at its discretion.Exercising this authority, the Ulrich trustee distributes an additional $20,000 to Roger and $20,000 to Sally.How much gross income from the trust must Sally recognize?

Which of the following is the annual maximum amount to be included as gross income by all of the income beneficiaries of the trust or estate?

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

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

Which of the following taxpayers use a Schedule K and K-1 to pass through income, loss, and credit amounts to the owners or beneficiaries?

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 Figure 28.3 in the text to address the following items.

The Gibson Estate is responsible for the income in respect of a decedent (IRD) of Juanita Gibson, the deceased. Define the term IRD and describe its treatment for Federal tax purposes

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

A decedent's income in respect of a decedent is subject to the Federal income tax, but it is excluded from the estate tax.

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

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 Sally recognize?

A gift to charity from its 2012 income is deductible on an estate's Form 1041 if it is made by the end of the ____________________ tax year.