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Exam 28: Income Taxation of Trusts and Estates

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Question 81

True/False

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If provided for in the controlling agreement, a trust might terminate when the income beneficiary reaches age 35.

A) True
B) False

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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) C
B) J
C) K
D) S

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

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Question 83

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The Philmore Estate is subject to a 40% Federal estate tax rate and a 25% Federal and state income tax rate. Generally, an administrative expense should be claimed on the estate tax return.

Like a corporation, the fiduciary reports and pays its own Federal income tax liability.

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) (e.g., the deceased, the estate, Rollo, Luisa, or Coco) if any, can deduct these items?

Reyes contributed assets to a trust and designated daughter Maria as the income beneficiary and grandson Julio as the remainder beneficiary. This year, fiduciary accounting income was $50,000. The trustee accumulated $5,000 of this amount and added it to trust corpus. Reyes pays Federal income tax on $5,000 for the year.

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

This year, the Nano Trust reported $50,000 entity accounting income and $40,000 distributable net income (DNI) . Nano distributed $30,000 cash to Horatio, its sole income beneficiary. Nano is a complex trust. Nano's distribution deduction is:

Beneficiary information concerning a trust's income and distributions are conveyed on Schedule ____________________ of the Form 1041.

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

The interest income of a trust usually is allocable to (income, remainder) beneficiaries.

The trust instrument indicates whether cost recovery is to fiduciary accounting income, thereby reducing the amount of the distribution to the income beneficiary.

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.

First-tier distributions allowed by the will or trust document are made at the discretion of the executor or trustee.