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Exam 28: Income Taxation of Trusts and Estates

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Question 41

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The Suarez Trust generated distributable net income (DNI) this year of $150,000, two-thirds of which was portfolio income, and the balance of which was exempt interest. Under the terms of the trust, Clara Suarez is to receive an annual income distribution of $30,000. At the discretion of the trustee, additional distributions can be made to Clara, or to Clark Suarez III. This year, the trustee's distributions to Clara totaled $60,000. Clark received $90,000. How much of the trust's DNI is assigned to Clark?

A) $0, only first-tier distributions are subject to Federal income tax.
B) $60,000
C) $75,000
D) $90,000

E) A) and B)
F) None of the above

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Question 42

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Your client Pryce is one of the income beneficiaries of the Santiago Trust. Pryce says to you, "I want all of the exempt interest income from Santiago to be allocated to me, as I am the income beneficiary who is subject to the highest marginal Federal income tax rate." How do you respond to Pryce's request?

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Special allocations of DNI are allowed o...

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Question 43

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You are responsible for the Federal income tax filings of the Tyrone Trust. Summarize the relevant due dates and filing requirements for Tyrone.

The Doyle Trust reports 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 must distribute $20,000 to Roger and $20,000 to Sally. After paying these amounts, the trustee is empowered to make additional distributions at its discretion. Exercising this authority, the trustee distributes an additional $25,000 to Roger and $50,000 to Sally. How much gross income from the trust must Roger recognize?

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

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

The Chen Trust is required to distribute its accounting income every year, one-half to Missy Chen, and one-half to the local church's homeless shelter. What is the Chen Trust's personal exemption?

Does the estate or trust's distributable net income always equal its deduction for distributions to beneficiaries? Are the two amounts ever equal in amount? Answer for estates, simple trusts, and complex trusts.

A fiduciary's cost recovery deductions are assigned corresponding to the disposition of entity____________________ income for the year.

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 typically can choose any fiscal tax year.

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

Trusts can select any Federal income tax year-end.

During the current year, the Santo Trust received $30,000 of taxable interest income, paid trustee's commissions of $3,000, and had no other income or expenses. The Santo trust instrument requires that $20,000 be paid annually to Marilyn, and $40,000 be paid annually to Domingo. How much gross income must Marilyn and Domingo recognize?

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.

The Zhao 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 Zhao, 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?

Beginning with its ________________ tax year, an estate must remit quarterly Federal estimated income tax payments.

When a beneficiary receives a distribution from a trust of an asset other than cash, generally a(n)____________________ basis is assigned to the asset.

Generally, an estate's taxable income is computed in a manner similar to that used for a(n)____________________.

Every simple trust is allowed a ________________ $ personal exemption.

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