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Exam 28: Income Taxation of Trusts and Estates

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Question 1

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The Kapoor Trust is your client.Complete the chart below,indicating Kapoor's trust accounting income for each of the alternatives. Interest income,taxable $60,000 Interest income,tax-exempt 30,000 Interest income,tax-exempt but AMT preference 10,000 Long-term capital gain 40,000 Trustee fee 5,000 ​ 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 ______________________

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Trust agreement provisions
Trust ...

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Question 2

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The Uldis Trust has distributable net income (DNI) for the year of $100,000 and no income from tax-exempt sources.Under the terms of the trust instrument,the trustee must distribute $75,000 to Roger and $75,000 to Sally.After paying these amounts,the trustee is empowered to make additional distributions at its discretion.Exercising this authority,the Uldis trustee distributes an additional $10,000 to Roger and $30,000 to Sally.How much gross income from the trust must Roger recognize?

A) $10,000
B) $50,000
C) $75,000
D) $85,000

E) A) and C)
F) C) and D)

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Question 3

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You are responsible for the Federal income tax filings of the Tyrone Trust.Summarize the relevant due dates and filing requirements for Tyrone.

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.

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?

Every simple trust is allowed a $____________________ personal exemption.

In computing the Federal taxable income of a trust,the ____________________ (first,last) step is to determine its fiduciary accounting income.

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 -In the year of termination,the entity's net operating loss carryovers are passed through to the beneficiaries.

Generally,an administrative expense attributable to municipal bond interest should be claimed on the estate's Form 706.

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 that might be used to reduce probate costs,but not Federal estate and gift tax.

Usually,a beneficiary takes a carryover basis when a trust distributes a non-cash asset.

A fiduciary assigns its tax credits to beneficiaries corresponding to the disposition of its ____________________ income for the year.

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.

The Willa estate reports $100,000 DNI,composed of $50,000 dividends,$20,000 taxable interest,$10,000 passive income,and $20,000 tax-exempt interest.Willa's two noncharitable income beneficiaries,Shanna and Tom,receive distributions of $75,000 each.How much of each class of income is deemed to have been distributed to Shanna? To Tom? Use the following template to structure your answer. ​ ​ Beneficiary Amount Received DNI,Income Type Corpus, Non-taxable Dividends Taxable Interest Passive Exempt Interest Shanna ​ ​ ​ ​ ​ ​ Tom ​ ​ ​ ​ ​ ​ Totals in DNI ​ ​ ​ ​ ​ ​

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?

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?

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 can choose between the cash and accrual methods of reporting its income and deductions.

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 fiduciary's distribution deduction shifts the tax burden for the distributed amount of current-year income from the entity to the beneficiary.