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Exam 28: Income Taxation of Trusts and Estates

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Question 71

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The trust instrument indicates whether cost recovery is ____________________ to fiduciary accounting income,thereby reducing the amount of the distribution to the income beneficiary.

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Question 72

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The Prakash Trust is required to pay its entire annual accounting income to the Daytona Museum,a qualifying charity.The trust's personal exemption is:

A) $0.
B) $100.
C) $300.
D) $600.

E) A) and B)
F) None of the above

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Question 73

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The deduction for the Sharma Trust's $100,000 gift to charity is ____________________ when one-third of Sharma's accounting income for the tax year constitutes exempt interest income.

The Uldis 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 $75,000 to Roger and $75,000 to Sally.After paying these amounts,the trustee is empowered to make additional distributions at its discretion.Exercising this authority,the Uldis trustee distributes an additional $10,000 to Roger and $30,000 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 can be distributed to beneficiaries and in amounts at the trustee's discretion.

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

The Raja Trust operates a welding business.Its current-year cost recovery deductions properly amount to $75,000.Raja's accounting income was $100,000,of which $40,000 was distributed to first-tier beneficiary Chuck,$25,000 was distributed to second-tier beneficiary Ruby,and $35,000 was accumulated by the trustee.Ruby also received a $25,000 discretionary corpus distribution.Raja's DNI was $80,000.Identify the treatment of Raja's cost recovery deductions.

A living trust is a revocable entity that is used to avoid ____________________ proceedings upon the death of the grantor.

The Willis Trust instrument provides that Tamara,the sole income beneficiary,is to receive $40,000 annually.If trust accounting income is not sufficient to pay this amount,the Willis trustee is empowered to invade corpus to the extent necessary.During the current year,the trust reports distributable net income (DNI) of $100,000,including $30,000 of net tax-exempt interest.In accordance with the trust instrument,$40,000 is paid to Tamara.What is Tamara's gross income from the Willis Trust for the current year?

Three months after Brianna Timkin died,her executor received the final $40,000 installment from a sale of land that Brianna completed several years ago.Which of the following statements is true?

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 Testa Trust was terminated this year and Chip,the beneficiary of the corpus,received all of the trust assets.The trust reported a $10,000 net operating loss for the current tax year;this was the only tax year in which the trust operated a business.Testa has one income beneficiary,Flo.As a result of these transactions:

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 $30,000 to Roger and $30,000 to Sally.After payment of 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 $25,000 to Sally.How much income from the trust must Sally recognize?

The first step in computing an estate's taxable income is the determination of its fiduciary accounting income for the year.

Sixty percent of the income received by the Atom Trust this year constituted municipal bond interest.Atom's trustee also made a $100,000 gift to the United Fund,a qualifying charity.The charitable deduction associated with this gift is limited to $60,000.

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

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.

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

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: