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Exam 20: Income Taxation of Trusts and Estates

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Question 51

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

A) True
B) False

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Question 52

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Distributable net income (DNI) is the (maximum, minimum) amount that can be included in the beneficiaries' gross incomes from the fiduciary for the year.

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Question 53

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

The IRS encourages (paper, electronic, composite) filing for Forms 1041.

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 -The fiduciary in charge of an estate.

Generally, an estate's taxable income is computed in a manner similar to that used for a(n) ____________________.

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.

For each of the following independent statements, choose the best answer. e. Tax attribute of complex trusts only f. Tax attribute of estates only g. Tax attribute of estates and complex trusts h. Tax attribute of neither estates nor complex trusts -The entity is controlled by Federal-level probate laws.

Your client Ming is a complex trust that operates exclusively in the U.S. Make a list of five or more tax planning opportunities that you might suggest to Ming.

When a beneficiary receives a distribution from a trust of an asset other than cash, generally a(n) ____________________ basis is assigned to the asset.

Corpus, principal, and assets of the trust are synonyms.

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

The Julius Trust made a gift to the United Charity on August 1, Year Two, from its Year One business profits. The trust's charitable contribution deduction can be claimed in either Year One or Year Two.

During the current year, the Santo Trust received $30,000 of taxable interest income, paid trustee's commissions of $3,000, and had no other income or expenses. The Santo trust instrument requires that $20,000 be paid annually to Marilyn, and $40,000 be paid annually to Domingo. How much gross income must Marilyn and Domingo recognize?

The Kapoor Trust is your client. Complete the chart below, indicating Kapoor's trust accounting income for each of the alternatives. 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 entity is a trust if the grantor retains the power to revoke the trust.

The Gable Trust reports $20,000 business income and $10,000 exempt interest income, and it paid a $3,000 fiduciary fee. Gable's distributable net income includes $10,000 of net tax­exempt income.

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 $50,000. Harry's AGI can increase by as much as $40,000.

Your client Pryce is one of the income beneficiaries of the Santiago Trust. Pryce says to you, "I want all of the exempt interest income from Santiago to be allocated to me, as I am the income beneficiary who is subject to the highest marginal Federal income tax rate." How do you respond to Pryce's request?

The Code defines a grantor trust as which of the following?