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Exam 28: Income Taxation of Trusts and Estates

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Question 81

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Income beneficiary Turk received $30,000 from the Urgent Trust.Trust accounting income for the year was $100,000.The trust generated $20,000 in cost recovery deductions.How much can Turk deduct with respect to the cost recovery deductions that Urgent generated?

A) $0
B) $6,000
C) $14,000
D) $20,000

E) All of the above
F) B) and D)

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Question 82

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An estate ____________________ (can/cannot) be liable for a Federal alternative minimum tax.

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Question 83

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The trust usually makes a distribution to the income beneficiaries in the amount of its fiduciary ____________________ income.

Consider the term fiduciary accounting 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?

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 -​A decedent created the entity.

Generally,capital gains are allocated to fiduciary income,because they arise from current-year transactions as directed by the trustee.

Which,if any,of the following statements relates to the tax treatment of both estates and trusts?

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?

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?

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 whose income is taxed to the donor,not the beneficiaries.

This year,the Nano Trust reported $50,000 entity accounting income and $40,000 distributable net income (DNI) .Nano distributed $60,000 cash to Horatio,its sole income beneficiary.Nano is a simple trust.Nano's distribution deduction is:

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.

Trusts can select any Federal income tax year-end.

Which of the following taxpayers can be subject to an entity-level Federal income tax?

The Gomez Trust is required to distribute $80,000 annually,split equally between its two income beneficiaries,Lara and Byron.If trust income is not sufficient to pay these amounts,the trustee can invade corpus to the extent necessary.During the current year,the trust has DNI of $60,000.Byron receives an additional $30,000 discretionary corpus distribution. a.How much of the $40,000 distributed to Lara is included in her gross income? b.How much of the $70,000 distributed to Byron is included in his gross income? c.How much of these distributions are first-tier distributions or second-tier distributions?

A Form 1041 must be filed by a trust that has $____________________or more gross income for the tax year.

The trustee of the Miguel Trust can distribute any amount of accounting income and corpus to the trust's income beneficiaries,Paula and George.This year,the trust incurred the following. Taxable interest income $40,000 Tax-exempt interest income 20,000 Long-term capital gains-allocable to corpus 10,000 Fiduciary's fees-allocable to corpus 6,000 The trustee distributed $40,000 to Paula and $40,000 to George. a.What is Miguel's trust accounting income? b.What is Miguel's DNI? c.What is Miguel's taxable income? d.How much gross income is recognized by each of the beneficiaries?

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

The Federal income taxation of a trust or estate has been described as a "modified pass-through" system.Compare fiduciary tax rules to those that apply to LLCs and to individuals.

Reggie is one of the income beneficiaries of the LaQuanda Estate,which is subject to a 35% marginal Federal estate tax rate,a 35% marginal Federal income tax rate,and a 10% marginal state income tax rate.This year,Reggie received all of the sales commissions that were earned and payable to Lulu LaQuanda (cash basis) at her death.Compute Reggie's § 691(c) deduction for the current year,given the following data. Sales commissions receivable $50,000 Deferred gain on installment sale,three payments to be received,starting next year 20,000