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Exam 20: Income Taxation of Trusts and Estates

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Question 41

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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?

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Entity accounting income is computed usi...

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Question 42

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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. -A trust that is required to distribute annual accounting income.

A) Complex
B) Decedent
C) Executor
D) Grantor
E) Administrator
F) Reversionary
G) Simple
H) Sprinkling
I) Trustee

J) A) and C)
K) B) and I)

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Question 43

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For each of the following independent statements, choose the best answer. -The entity is an information-reporting, not a tax-paying, taxpayer.

Usually, a beneficiary takes a carryover basis when a trust distributes a noncash asset.

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 trust that can accumulate rather than distribute its accounting income.

The Ellie Trust, a calendar year entity, wants to make a gift to a charity that is deductible on its year 1 Form 1041. The gift must be made by Ellie:

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

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?

The unextended due date for a calendar year trust to file its Form 1041 is March 15.

For each of the following independent statements, choose the best answer. -Undistributed income is subject to the additional tax on net investment income.

Income beneficiary Molly wants to receive all of the municipal bond interest income of the Brenner Trust. A special allocation of this sort must be supported by a nontax _________.

Winston is classified as a grantor trust because Harry, the donor, can revoke the trust. Consequently, Winston need not file an annual Form 1041, and Harry reports the trust items on his own Form 1040.

The Prakash Trust is required to pay its entire annual accounting income to beneficiaries Sam and Janet. The trust's personal exemption is:

Reyes contributed assets to a trust and designated daughter Maria as the income beneficiary and grandson Julio as the remainder beneficiary. This year, fiduciary accounting income was $50,000. The trustee paid $5,000 of this amount as premiums for a life insurance policy on Anita, Reyes's wife. Reyes pays Federal income tax on $5,000 for the year.

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 corpus), 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?

You are responsible for the Federal income tax filings of the Tyrone Trust. Summarize the relevant due dates and filing requirements for Tyrone.

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 rental income of a trust usually is allocable to________ income, remainder) beneficiaries.

Jose is subject to the top marginal Federal income tax rates. Carlita is considering establishing a trust in which Jose would be an income beneficiary. Considering only income tax consequences, Jose should be designated as: