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Exam 28: Income Taxation of Trusts and Estates

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Question 1

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Three weeks after Abed died,his brother Tony properly received Abed's last paycheck from his employer.The gross amount of the check was $4,000,and a $300 deduction for state income taxes was subtracted in computing the net amount of the payment.Which of the following statements is true?

A) The $300 is deductible on neither Tony's income tax return nor on Abed's estate tax return.
B) The $300 is deductible both on Tony's income tax return and on Abed's estate tax return.
C) The $300 is deductible only in computing Abed's taxable estate.
D) The $300 is deductible only on the income tax return of Abed's estate.

E) A) and B)
F) A) and C)

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Question 2

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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 $30,000.Harry's AGI can increase by as much as $40,000.

A) True
B) False

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Question 3

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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.

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

Under the Federal income tax rules for trusts and estates,a(n) ____________________ generally must use a calendar tax year,but a(n) ____________________ can select any tax year-end.

The Uldis Trust has distributable net income (DNI) for the year of $100,000 and no income from tax-exempt sources.Under the terms of the trust instrument,the trustee must distribute $75,000 to Roger and $75,000 to Sally.After paying these amounts,the trustee is empowered to make additional distributions at its discretion.Exercising this authority,the Uldis trustee distributes an additional $10,000 to Roger and $30,000 to Sally.How much gross income from the trust must Roger recognize?

The Kapoor Trust is your client.Complete the chart below,indicating Kapoor's trust accounting income for each of the alternatives. ​

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 complex trust is automatically exempt from the Federal AMT.

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 -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. 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 is entitled to a personal exemption of $600.

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

Sixty percent of the income received by the Atom Trust this year constituted municipal bond interest.Atom's trustee also made a $100,000 gift to the United Fund,a qualifying charity.The charitable deduction associated with this gift is limited to $60,000.

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.

Ellie Chisum,a calendar-year individual,wants to make a gift to a charity that is deductible on her year 1 Form 1040.The gift must be made by Ellie: ​

This year,the Huang Trust is a complex trust.This year,it distributed all of its accounting income and $5,000 from corpus,to its sole income beneficiary Kun.Huang's taxable income for the year is:

The Philmore Estate is subject to a 40% Federal estate tax rate and a 45% Federal and state income tax rate.Generally,an administrative expense should be claimed on the estate's income tax return.

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

The Griffin Trust makes a gift of long-term capital gain property to a qualifying charity.Griffin's entity-level deduction cannot exceed 30% of distributable net income.

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 a trust.