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Exam 28: Income Taxation of Trusts and Estates

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Question 51

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The Yeoman Trust has generated several Federal income tax credits for this tax year.Which taxpayer(s),if any,can use these credits in computing a Federal income tax liability, e.g., the grantor, the trust, its income beneficiaries, its remainder beneficiaries? Answer for estates, simple trusts, and complex trusts.

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A simple trust does not claim any tax cr...

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Question 52

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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.Complex b.Decedent c.Executor d.Grantor e.Administrator 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.

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Question 53

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Consider the term distributable net 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?

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.

Dexter established a divorce trust to benefit his ex-wife Jena.The accounting income of the trust is distributed to Jena,in satisfaction of the year's alimony obligation.Under Subchapter J rules,____________________,(Dexter,Jena) and not the trust,is taxed on the amount of the distribution.

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.

A complex trust pays tax on the income that it accumulates (i.e.,that it does not distribute).

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

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

In computing distributable net income (DNI) for a trust,one removes any net capital gain or loss that is allocable to income.

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.Administrator f.Reversionary g.Simple h.Sprinkling i.Trustee -A trust whose remainder beneficiary is its grantor.

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

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

The Chen Trust is required to distribute its accounting income every year,one-half to Missy Chen,and one-half to the local church's homeless shelter.What is the Chen Trust's personal exemption?

Beginning with its ____________________ tax year,an estate must remit quarterly Federal estimated income tax payments.

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

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

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.

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.Administrator f.Reversionary g.Simple h.Sprinkling i.Trustee -An estate always is created upon the death of this party.

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?