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Exam 28: Income Taxation of Trusts and Estates

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Question 81

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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.

A) True
B) False

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Question 82

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The Zhong Trust is a calendar-year taxpayer. Its Form 1041 is due on which date in the following year?

A) March 15.
B) April 15.
C) May 15.
D) September 15, if extended.

E) C) and D)
F) B) and C)

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Question 83

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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.

The Jiang Trust operates a manufacturing business. Yan created the trust several years ago by contributing a successful sole proprietorship. The trust distributed one-half of its DNI this year to Yan. Yan can retain all of the trust's depreciation deductions if:

When a beneficiary receives a distribution from a trust of an asset other than cash, the realized loss generally is________________(recognized, not recognized) by the trust.

For each of the following independent statements, choose the best answer. a. Tax attribute of complex trusts only b. Tax attribute of estates only c. Tax attribute of estates and complex trusts d. Tax attribute of neither estates nor complex trusts -The entity's management generally is directed by the controlling document as to the date of the entity's termination.

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:

When a trust operates a trade or business, it can claim a deduction for wages paid to employees.

The Stratford Estate incurs a $25,000 casualty loss in disposing of the real property of the decedent. The deduction is claimed against the Federal estate tax, unless by election it is claimed on the estate's income tax return.

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.

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

For each of the following independent statements, choose the best answer. a. Tax attribute of complex trusts only b. Tax attribute of estates only c. Tax attribute of estates and complex trusts d. Tax attribute of neither estates nor complex trusts -Distributable net income is used to account for distributions by the entity to its beneficiaries.

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.

For each of the following independent statements, choose the best answer. a. Tax attribute of complex trusts only b. Tax attribute of estates only c. Tax attribute of estates and complex trusts d. Tax attribute of neither estates nor complex trusts -The entity is an information-reporting, not a tax-paying, taxpayer.

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.

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

The DaSinzi Estate has two equal income beneficiaries (Rollo and Luisa) and one remainder beneficiary (Coco). The estate operates a business and generates cost recovery deductions. Which taxpayer(s), if any, can deduct these items,e.g., the deceased, the estate, Rollo, Luisa, or Coco?

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?

Consider the term fiduciary accounting 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?