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Exam 28: Income Taxation of Trusts and Estates

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Question 71

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Bob is one of the income beneficiaries of the LaQuanda Estate, which is subject to a 45% marginal Federal estate tax rate, a 35% marginal Federal income tax rate, and a 5% marginal state income tax rate.This year, Bob received all of the sales commissions that were earned and payable to Lulu LaQuanda (cash basis) at her death.Compute Bob's § 691(c) deduction for the current year, given the following data.

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Net IRD = $60,000 income receivable (IRD...

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Question 72

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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?

A) Complex trust.
B) Partnership.
C) S corporation.
D) All of the above taxpayers use Schedules K and K-1.

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

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Question 73

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Kip and his wife Biddie file calendar-year Form 1040 joint returns. Kip died this year on April 16. The Form 1040 is filed as a joint return, signed by Biddie and by Kip's executor.

The Crown Trust distributed one-half of its accounting income to Lee this year.Lee also is allocated one-half of Crown's credit for building low-income housing.

An estate operates a manufacturing business. It can claim a domestic production activities deduction (DPAD).

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.

A Form 1041 must be filed by an estate that recognizes $____________________ or more gross income for the tax year.

Is a trust subject to the alternative minimum tax? Or does the trust "pass through" AMT items to its grantor and beneficiaries?

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?

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

Tax planning motivations usually are secondary to other objectives in deciding whether to create a trust.

The Griffin Trust makes a gift to a qualifying charity. Griffin's entity-level deduction is allowed only to the extent of 50% of distributable net income.

A fiduciary's cost recovery deductions are assigned corresponding to the disposition of entity ____________________ income for the year.

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

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

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

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

The decedent's estate must terminate within four years of the date of death.

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?

When a beneficiary receives a distribution from a trust of an asset other than cash, the realized loss could be disallowed under the ____________________ rule.