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Exam 20: Income Taxation of Trusts and Estates

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Question 81

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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 business income of $30,000, a long-term capital gain of $20,000 (allocable to corpus), and a trustee commission expense of $4,000 (allocable to corpus). Use the format of Figure 20.3 in the text to address the following items..

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Question 82

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The tax rules regarding the income taxation of trusts and estates are included in which Subchapter of the Internal Revenue Code?

A) S.
B) K.
C) J.
D) C.

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

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Question 83

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The Edgerton 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 Edgerton, 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?

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.

Entity accounting income is controlled by the terms of the ____________________ for an estate or the ____________________ for a trust.

The Bard Estate incurs a $25,000 fee in disposing of the real property of the decedent. The deduction can be claimed $10,000 against the Federal estate tax, and $15,000 on the estate's income tax return.

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

Gain or loss is recognized by a trust when it distributes a non-cash asset.

A ____________________ tier distribution is one that the trust agreement requires to be made by the trustee to the income beneficiary. or

Which of the following taxpayers can be subject to an entity-level Federal income tax?

A ____________________ trust is a revocable entity that is used to avoid probate upon the death of the grantor.

Which, if any, of the following statements relates to the tax treatment of both estates and trusts?

A Form 1041 must be filed by an estate that recognizes $____________________ or more gross income for the tax year.

The Jain Trust is required to pay its entire annual accounting income to the Daytona Museum, a qualifying charity. The trust's personal exemption is:

The Bedford 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 is required to distribute $30,000 to Roger and $60,000 to Sally. After payment of these amounts, the trustee is empowered to make additional distributions at its discretion. Exercising this authority, the Bedford trustee distributes an additional $40,000 to Roger, and $40,000 to Sally. How much income from the trust must Sally recognize?

The exempt interest income of a trust usually is allocable to ____________________ beneficiaries.