Exam 20: Income Taxation of Trusts and Estates

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 about the $300 is true?

For each of the following independent statements, choose the best answer. -Distributable net income is used to account for the entity's distributions to its beneficiaries.

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

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 trust whose income is taxed to the donor, not the beneficiaries.

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 trust whose remainder beneficiary is its grantor.

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.

Tax planning motivations usually predominate over other objectives in deciding whether to create a trust.

A trust holds assets that will generate net investment income NII) and trigger the additional Medicare taxes. The trustee should:

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

Generally, capital gains are allocated to fiduciary income, because they arise from current-year transactions as directed by the trustee.

When DNI includes exempt interest income, the beneficiary includes less than the full amount of DNI in current- year gross income.

A fiduciary assigns its tax credits to beneficiaries corresponding to the disposition of its_________income for the year.

The Julius Trust made a gift to the United Charity on August 1, year 2, from its year 1 business profits. The trust's charitable contribution deduction can be claimed in year 2.

The Gibson Estate is responsible for collecting outstanding income amounts and paying the remaining obligations of Juanita Gibson, the deceased. How does Federal income tax law treat these items? Hint: Define and use the term income in respect of a decedent in your answer.

The Form 1041 of a calendar year trust is due on_________ 15 not including extensions) of the following year.

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

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 trust whose income can be distributed to beneficiaries and in amounts at the trustee's discretion.

Under the Federal income tax rules for trusts and estates, an)________ generally must use a calendar tax year, but an) ___________can select any tax year-end.

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

The present value of a trust's Federal income tax liability is reduced when: