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Exam 19: Income Taxation of Trusts and Estates

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Question 61

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The trustee of the Miguel Trust can distribute any amount of accounting income and corpus to the trust's income beneficiaries,Paula and George.This year,the trust incurred the following. The trustee distributed $40,000 to Paula and $40,000 to George. a.What is Miguel's trust accounting income? b.What is Miguel's DNI? c.What is Miguel's taxable income? d.How much gross income is recognized by each of the beneficiaries?

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a.$60,000.
b.$57,000.
c.$29,900.
d.$19,0...

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Question 62

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The Roz Trust has 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 paying these amounts,the trustee is empowered to make additional distributions at its discretion.Exercising this authority,the trustee distributes an additional $10,000 to Roger and $30,000 to Sally.How much gross income from the trust must Sally recognize?

A) $80,000.
B) $60,000.
C) $50,000.
D) $20,000.

E) B) and D)
F) A) and B)

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Question 63

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

A fiduciary's ____________________ ____________________ deductions are assigned corresponding to the disposition of entity accounting income for the year.

An estate has $100,000 of DNI,composed of $30,000 dividends,$20,000 taxable interest,$10,000 passive income,and $40,000 tax-exempt interest.The trust's two noncharitable income beneficiaries,Shanna and Tom,receive distributions of $60,000 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.

During the current year,the Madison Trust received $40,000 of taxable interest income,paid trustee's commissions of $4,000,and had no other income or expenses.The 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 Code defines a "simple trust" as which of the following?

The LMN Trust is a simple trust that correctly uses the calendar year for tax purposes.Its income beneficiaries (Kathie,Lynn,Mark,and Norelle)are entitled to the trust's annual accounting income in shares of one-fourth each.For the current calendar year,the trust has ordinary income of $80,000,a long-term capital gain of $20,000 (allocable to income),and a trustee commission expense of $4,000 (allocable to corpus).Use the format of Figure 19-3 to address the following items. a.How much income is each beneficiary entitled to receive? b.What is the trust's DNI? c.What is the trust's taxable income? d.How much is taxed to each of the beneficiaries?

The entity is a grantor trust if the grantor retains the power to ___________________ the trust.

The Eagleton Trust generated distributable net income (DNI) this year of $120,000,one-third of which was portfolio income,and the balance of which was exempt interest.Under the terms of the trust,Clara Eagleton is to receive an annual income distribution of $40,000.At the discretion of the trustee,additional distributions can be made to Clara,or to Clark Eagleton III.This year,the trustee's distributions to Clara totaled $50,000.Clark received $100,000.How much of the trust's DNI is assigned to Clark?

Three months after Emma died,her executor received the final $10,000 installment of Emma's Super Lottery winnings from the state.Which of the following statements is true?

A complex trust can claim a Year 1 deduction for a gift to charity,where the contribution was made in Year 2 out of gross income recognized in Year 1.

The entity's fiduciary is generally free to select the date of the entity's termination.

The trustee of the Epsilon Trust distributed an asset to Telly,a qualifying income beneficiary.The asset's basis to the trust was $10,000,and its fair market value on the distribution date was $50,000.Which of the following statements is true?

With respect to a selling expense incurred by an estate in disposing of the decedent's property,a deduction can be claimed on the Form 1041 only if the executor waives the corresponding deduction in computing the Federal estate tax.

In the year in which an estate terminates,its beneficiaries receive and can use as their own any unexpired NOL carryforwards proportionately to the corpus assets that they received.

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

The deduction for a fiduciary's gift to charity is disallowed proportionate to its ____________________ income realized during the year.

List some of the most commonly encountered motivations for creating fiduciary entities.

The Yellow Trust incurred $10,000 of portfolio income.Its corporate trustee paid fiduciary fees of $1,000 therefrom.Yellow holds as one of its assets an insurance policy on the life of Marcia (the grantor) .Premiums of $1,000 on this policy for the year were paid by Marcia from her personal funds.How much gross income does Marcia include with respect to these trust activities?