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Exam 28: Income Taxation of Trusts and Estates

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Question 31

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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.

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Question 32

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Summarize the Federal income tax rules that apply to a trust or estate concerning the alternative minimum tax. Include comments about the applicable tax rates, and any personal exemption.

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An estate or trust is subject to the alt...

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Question 33

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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.

Harry, the sole income beneficiary, received a $40,000 distribution from the Lucy Trust, in a year when the trust's distributable net income was $30,000. Harry's AGI can increase by as much as $40,000.

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:

An example of income in respect of a decedent is the taxpayer's last paycheck, uncollected at death.

This year, the Huang Trust is a complex trust. This year, it distributed all of its accounting income and $5,000 from corpus, to its sole income beneficiary Kun. Huang's taxable income for the year is:

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 Roger recognize?

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 Malik Estate operates a manufacturing business. Malik made no income distributions this year. It can claim a domestic production activities deduction (DPAD).

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

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

The Gibson Estate is responsible for collecting outstanding income amounts and paying the remaining obligations of Juanita Gibson, the deceased. How does Federal income tax law treat these items? Hint: Define and use the term income in respect of a decedent in your answer.

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

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?

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

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

The Kapoor Trust is your client. Complete the chart below, indicating Kapoor's trust accounting income for each of the alternatives. $\begin{array}{llr} \text { Interest income, taxable } & \$ 60,000\\ \text { Interest income, tax-exempt } &30,000\\ \text { Interest income, tax-exempt but AMT preference} &10,000\\ \text {Long-term capital gain } &40,000\\ \text { Trustee fee} &5,000\\\end{array}$ Trust agreement provisions Trust accounting income Fees and capital gains allocable to corpus ______________________ Capital gains allocable to corpus, one- half of fees allocable to income ______________________ Capital gains allocable to income, silent concerning allocation of fees ______________________ Fees and exempt income allocable to corpus, silent concerning allocation of capital gain/loss ______________________

The Zhao Estate generated distributable net income (DNI) this year of $100,000, one-fourth of which was tax- exempt interest, and the balance of which was long-term capital gain. Kyle Zhao, the sole income beneficiary of the estate, received a distribution of the entire $125,000 accounting income of the entity. How does Kyle report the distribution?

The Code defines a "simple trust" as which of the following?