Question 1

The executor or administrator is responsible for all the following estate duties except

Accepted Answer

A)  preserving the estate's existence as a separate taxpayer. 
B)  collecting the assets. 
C)  paying the debts and taxes. 
D)  distributing the property. 
A)  preserving the estate's existence as a separate taxpayer. 
B)  collecting the assets. 
C)  paying the debts and taxes. 
D)  distributing the property. A

Question 2

Briefly discuss the reasons for establishing a trust.

Accepted Answer

Possible tax savings, professional management of assets, restrictions on the donee's use or consumption of assets, protect assets from creditors.

Question 3

In the current year, a trust has distributable net income (DNI) of $30,000. During the year, the trust makes a mandatory distribution to Sarah of $5,000 and a discretionary distribution of $10,000 to Kyle. The trust has no tax-exempt income. The distribution deduction of the trust is

Accepted Answer

A)  $30,000. 
B)  $15,000. 
C)  $10,000. 
D)  $5,000. 
A)  $30,000. 
B)  $15,000. 
C)  $10,000. 
D)  $5,000. B

Question 4

Michael died in 2013 with a taxable estate and estate tax base of $6,000,000. Michael's estate owed no state death taxes. Michael's estate includes $250,000 of income in respect of a decedent (IRD), none of which is received by his surviving spouse. His estate had no DRD. The estate collects $200,000 of the IRD during its current tax year. The Sec. 691(c) deduction for the estate in current year is

Accepted Answer

A)  $153,000. 
B)  $122,400. 
C)  $90,000. 
D)  $80,000. 
A)  $153,000. 
B)  $122,400. 
C)  $90,000. 
D)  $80,000.

Question 5

Distributable net income (DNI) does not include capital gains allocated to principal.

Accepted Answer

A) True 
 B)False

Question 6

All of the following are advantages of a sprinkling trust, except

Accepted Answer

A)  the trustee can choose the amount to distribute among multiple beneficiaries. 
B)  the trustee can determine the amount to retain in the trust. 
C)  the trustee can determine the amount to distribute to the sole trust beneficiary. 
D)  the trustee can consider the tax rates of the beneficiaries and trust. 
A)  the trustee can choose the amount to distribute among multiple beneficiaries. 
B)  the trustee can determine the amount to retain in the trust. 
C)  the trustee can determine the amount to distribute to the sole trust beneficiary. 
D)  the trustee can consider the tax rates of the beneficiaries and trust.

Question 7

Income in respect of a decedent (IRD) includes interest earned by a cash-basis taxpayer but not received by the taxpayer before death.

Accepted Answer

A) True 
 B)False

Question 8

Distributable net income (DNI) is not reduced by the charitable contribution deduction when calculating the deductible discretionary distributions for a complex trust.

Accepted Answer

A) True 
 B)False

Question 9

A trust has net accounting income of $30,000, but distributable net income (DNI) of only $25,000 because certain expenses are charged to principal. The trust is required to distribute $10,000 to Alice and it makes a discretionary distribution of $20,000 to Ben. The trust has no tax-exempt income. The amount that Ben reports as gross income is

Accepted Answer

A)  $20,000. 
B)  $16,667. 
C)  $15,000. 
D)  none of the above 
A)  $20,000. 
B)  $16,667. 
C)  $15,000. 
D)  none of the above

Question 10

What is the benefit of the 65-day rule?

Accepted Answer

The benefit of the 65-day rule is that i

Question 11

Fred, a cash-basis taxpayer, died on January 15, 2018. In 2019, the estate made a $9,000 distribution from estate income to Fred's sole heir. The estate had $20,000 of taxable interest and a $10,000 net long-term capital gain allocable to corpus. The estate incurred $5,000 in expenses attributable to the estate income. What is the estate's distributable net income (DNI)?

Accepted Answer

A)  $15,000 
B)  $20,000 
C)  $25,000 
D)  $30,000 
A)  $15,000 
B)  $20,000 
C)  $25,000 
D)  $30,000

Question 12

Identify which of the following statements is true.

Accepted Answer

A)  The personal exemption available to a trust is adjusted annually based on changes in the consumer price index. 
B)  Income received by a trust beneficiary has the same character it had at the trust level. 
C)  Distributable net income (DNI) excludes tax-exempt income. 
D)  All of the above are false. 
A)  The personal exemption available to a trust is adjusted annually based on changes in the consumer price index. 
B)  Income received by a trust beneficiary has the same character it had at the trust level. 
C)  Distributable net income (DNI) excludes tax-exempt income. 
D)  All of the above are false.

Question 13

Explain the three functions of distributable net income (DNI).

Accepted Answer

DNI establishes the maximum amount on wh

Question 14

Mary died this year. Her will creates a trust for the benefit of her children. A portion of the estate's assets are placed in this trust. The estate has income from assets it will transfer to other beneficiaries at a later date. Mary's brother Joe is the trustee of the trust and executor of the estate. Which of the following statements is true?

Accepted Answer

A)  Joe must choose December 31 as the tax year-end for both the estate and trust. 
B)  Joe is free to choose any tax year-end for both the trust and estate. 
C)  Joe must choose December 31 as the estate tax year-end but is free to choose any tax year-end for the trust. 
D)  Joe must choose December 31 as the trust tax year-end but is free to choose any tax year-end for the estate. 
A)  Joe must choose December 31 as the tax year-end for both the estate and trust. 
B)  Joe is free to choose any tax year-end for both the trust and estate. 
C)  Joe must choose December 31 as the estate tax year-end but is free to choose any tax year-end for the trust. 
D)  Joe must choose December 31 as the trust tax year-end but is free to choose any tax year-end for the estate.

Question 15

A tax entity, often called a fiduciary, includes all of the following except

Accepted Answer

A)  estates. 
B)  complex trusts. 
C)  testamentary trusts. 
D)  All of the above are fiduciaries. 
A)  estates. 
B)  complex trusts. 
C)  testamentary trusts. 
D)  All of the above are fiduciaries.

Question 16

A trust distributes 30% of its income to Mark and 20% to Nancy. The remaining 50% is accumulated. The trust's depreciation is $1,000. The trust instrument is silent regarding the depreciation deduction. State law requires the depreciation be charged to principal. What part of the depreciation deduction will be allocated to Mark?

Accepted Answer

A)  $0 
B)  $200 
C)  $300 
D)  $1,000 
A)  $0 
B)  $200 
C)  $300 
D)  $1,000

Question 17

Which of the following is the most accurate statement concerning the use of trusts in tax planning?

Accepted Answer

A)  The grantor trust rules allow grantors to shift income into trusts and reduce their own taxes. 
B)  Nontax reasons for the use of trusts (such as avoidance of probate) typically outweigh tax reasons for creating trusts today. 
C)  The large 15% tax bracket available to trusts allows complex trusts to be used as an income-shifting device. 
D)  None of the above statements are correct. 
A)  The grantor trust rules allow grantors to shift income into trusts and reduce their own taxes. 
B)  Nontax reasons for the use of trusts (such as avoidance of probate) typically outweigh tax reasons for creating trusts today. 
C)  The large 15% tax bracket available to trusts allows complex trusts to be used as an income-shifting device. 
D)  None of the above statements are correct.

Question 18

The Tucker Trust was established six years ago. The trust is required to distribute all of the trust income at least annually to Betty for life. Capital gains are credited to principal. The current year results of the trust are as follows:
Amounts Allocable To
Income Principal
Dividends $15,000
Rental income from land 2,500
Tax-exempt interest 7,500
Rental expenses 500
Trustee fees $600
Tax return preparation fee 250
Capital gain on stock sale (stock purchased five years ago) 24,250 6,000
Distribution of net accounting income 1,300
Payment of estimated taxes
Compute (a) distributable net income (DNI), (b) the distribution deduction, (c) trust taxable income, and (d) Betty's reportable income and its classification. Charge all of the deductible expenses against rent income.

Accepted Answer

(a) DNI = $23,650 ($15,000 + $2,500 + $7

Question 19

Describe the tier system for trust beneficiaries.

Accepted Answer

The tier system distinguishes between ma

Question 20

Martha died and by her will, specifically bequeathed, and the executor distributed, $20,000 cash and a $70,000 house to Harold. The distributions were made in a year in which the estate had $65,000 of DNI, all from taxable sources. The maximum Harold will be required to report as gross income as a result of these distributions is

Accepted Answer

A)  $0. 
B)  $20,000. 
C)  $65,000. 
D)  $70,000. 
A)  $0. 
B)  $20,000. 
C)  $65,000. 
D)  $70,000.

The executor or administrator is responsible for all the following estate duties except

Briefly discuss the reasons for establishing a trust.

In the current year, a trust has distributable net income (DNI) of $30,000. During the year, the trust makes a mandatory distribution to Sarah of $5,000 and a discretionary distribution of $10,000 to Kyle. The trust has no tax-exempt income. The distribution deduction of the trust is

Distributable net income (DNI) does not include capital gains allocated to principal.

All of the following are advantages of a sprinkling trust, except

Income in respect of a decedent (IRD) includes interest earned by a cash-basis taxpayer but not received by the taxpayer before death.

Distributable net income (DNI) is not reduced by the charitable contribution deduction when calculating the deductible discretionary distributions for a complex trust.

What is the benefit of the 65-day rule?

Identify which of the following statements is true.

Explain the three functions of distributable net income (DNI).

A tax entity, often called a fiduciary, includes all of the following except

Which of the following is the most accurate statement concerning the use of trusts in tax planning?

Describe the tier system for trust beneficiaries.

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Administrative Procedures

Us Taxation of Foreign-Related Transactions

Filters

Exam 14: Income Taxation of Trusts and Estates

The executor or administrator is responsible for all the following estate duties except

Briefly discuss the reasons for establishing a trust.

In the current year, a trust has distributable net income (DNI) of $30,000. During the year, the trust makes a mandatory distribution to Sarah of $5,000 and a discretionary distribution of $10,000 to Kyle. The trust has no tax-exempt income. The distribution deduction of the trust is

Distributable net income (DNI) does not include capital gains allocated to principal.

All of the following are advantages of a sprinkling trust, except

Income in respect of a decedent (IRD) includes interest earned by a cash-basis taxpayer but not received by the taxpayer before death.

Distributable net income (DNI) is not reduced by the charitable contribution deduction when calculating the deductible discretionary distributions for a complex trust.

What is the benefit of the 65-day rule?

Identify which of the following statements is true.

Explain the three functions of distributable net income (DNI).

A tax entity, often called a fiduciary, includes all of the following except

Which of the following is the most accurate statement concerning the use of trusts in tax planning?

Describe the tier system for trust beneficiaries.

Tax Research

Corporate Formations and Capital Structure

The Corporate Income Tax

Corporate Nonliquidating Distributions

Other Corporate Tax Levies

Corporate Liquidating Distributions

Corporate Acquisitions and Reorganizations

Consolidated Tax Returns

Partnership Formation and Operation

Special Partnership Issues

S Corporations

The Gift Tax

The Estate Tax

Administrative Procedures

Us Taxation of Foreign-Related Transactions

Filters