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Exam 20: Income Taxation of Trusts and Estates

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Question 61

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List the three major functions of distributable net income (DNI) as that amount is used under Federal income tax law.

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-DNI determines the maximum amount that ...

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Question 62

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A trust might be used when a married couple is divorcing.

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Question 63

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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.

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

Under the Federal income tax rules for trusts and estates, a(n) generally must use a calendar tax year, but a(n) can select any tax year-end.

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:

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 is taxed to the donor, not the beneficiaries.

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 $50,000.

The interest income of a trust usually is allocable to (income, remainder) beneficiaries.

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.

"First­tier distributions" allowed by the will or trust document are made at the discretion of the executor or trustee.

The distributable net income (DNI) of a fiduciary taxpayer:

The trust usually makes a distribution to the income beneficiaries in the amount of its fiduciary ____________________ income.

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 entitled to a personal exemption of $600.

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 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 Stratford Estate incurs a $25,000 legal fee in disposing of the real property of the decedent. The executor can decide to claim a $5,000 deduction against the Federal estate tax, and a $20,000 deduction on the estate's income tax return.

The grantor of a trust generally designates both ____________________ and ____________________ beneficiaries under the controlling agreement.

The Yellow Trust incurred $10,000 of portfolio income. Its corporate trustee paid fiduciary fees of $1,000 therefrom, and also paid $1,000 in premiums for a life insurance policy on Marcia, the grantor of the trust. How much gross income does Marcia include with respect to these trust activities?

The Prasad Trust incurred the following items for 2014. Compute Prasad's tentative minimum tax for the year. Prasad does not hold any credits available to reduce the AMT liability.