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Exam 28: Income Taxation of Trusts and Estates

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Question 61

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The trust usually makes a distribution to the income beneficiaries in the amount of its fiduciary____________________ income.

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Question 62

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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?

A) The $40,000 is both included in Brianna's gross estate, and subject to tax on her estate's income tax return.
B) The $40,000 is subject to neither income nor estate tax, because it was received after Brianna's death.
C) The $40,000 is subject to tax only on her estate's income tax return.
D) The $40,000 is included only in Brianna's gross estate.

E) A) and B)
F) All of the above

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Question 63

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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 -The fiduciary in charge of an estate.

The unextended due date for a calendar-year trust to file its Form 1041 is March 15.

Judy can claim one-third of the Sweet Estate's cost recovery deductions, because she received one-third of the fiduciary's distributable net income (DNI).

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

The Brighton 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 $25,000 to Roger and $50,000 to Sally. After payment of these amounts, the trustee is empowered to make additional distributions at its discretion. Exercising this authority, the Brighton trustee distributes an additional $20,000 to Roger, and $30,000 to Sally. How much income from the trust must Sally recognize?

Under IRS regulations, the decedent's estate must terminate within four years of the date of death, so as to minimize income-shifting techniques.

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

The Circle Trust reports some exempt interest income for the year. How does this investment income affect Circle's deduction of its fiduciary fees? Charitable contributions?

The Whitmer Trust operates a manufacturing business and distributes the profits to its income beneficiaries. Whitmer also passes through to the income beneficiaries the data needed to compute their credit or deduction for foreign income taxes paid.

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 that is required to distribute annual accounting income.

The Form 1041 of a calendar-year trust is due on ________________ 15 (not including extensions) of the following year.

A trust might be used when a married couple is divorcing.

A decedent's income in respect of a decedent is subject to the Federal income tax, but it is excluded from the estate tax.

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 AMT preferences and adjustments pass through to the income beneficiaries.

The Julius Trust made a gift to the United Charity on August 1, Year Two, from its Year One business profits. The trust's charitable contribution deduction can be claimed in Year Two.

An estate's remainder beneficiary generally must wait until the entity is terminated by the executor to receive any distributions.

Tax planning motivations usually predominate over other objectives in deciding whether to create a trust.

The Chen Trust incurred the following items during the year. What is Chen's deduction for the tax preparation fees?