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Exam 20: Income Taxation of Trusts and Estates

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Question 91

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Tax professionals use the terms simple trust and complex trust when dealing with fiduciary arrangements. How does one know whether a trust is "simple" or "complex?" When is this determination made?

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Under the rules of Subchapter J, a simpl...

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Question 92

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The Whitmer Trust operates a manufacturing business. When Whitmer incurs a net operating loss, the current-year deduction passes through to the income beneficiaries.

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B) False

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Question 93

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A (first, second, third) -tier distribution is one that the trust agreement requires to be made by the trustee to the income beneficiary.

Which of the following is a typical duty of an executor of an estate?

For each of the following independent statements, choose the best answer. e. Tax attribute of complex trusts only f. Tax attribute of estates only g. Tax attribute of estates and complex trusts h. Tax attribute of neither estates nor complex trusts -For a calendar-year entity, the Form 1041 has an unextended due date of April 15.

For each of the following independent statements, choose the best answer. e. Tax attribute of complex trusts only f. Tax attribute of estates only g. Tax attribute of estates and complex trusts h. 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.

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

List at least three non-tax reasons that you might suggest to your client Connie that she should consider shifting some income and assets to a trust.

If the grantor can receive borrowed funds from the trust at a below-market interest rate, the entity (is, is not) treated as a grantor trust.

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

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

Reyes contributed assets to a trust, designating daughter Maria as the income beneficiary, and grandson Julio as the remainder beneficiary. This year, fiduciary accounting income was $50,000. The trustee paid $5,000 of this amount as Julio's high school tuition. Reyes pays Federal income tax on $5,000 for the year.

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?

Trusts can select any Federal income tax year-end.

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

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

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

Which of the following restrictions applies concerning distributions to trust beneficiaries?

With respect to a trust, the terms creator, donor, and grantor are synonyms.

A complex trust pays tax on the income that it accumulates (i.e., that it does not distribute).