Exam 14: Income Taxation of Trusts and Estates

Panther Trust has net accounting income and distributable net income of $100,000,$75,000 from taxable sources and $25,000 from tax-exempt sources.During the year,the trust makes a mandatory distribution to Julius and Steve of $50,000 each.The distribution deduction is

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

Briefly discuss the reasons for establishing a trust.

Estates and trusts

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

A trust is required to distribute 10% of its income to Eleanor.In addition,the trustee in his discretion may distribute income to Eleanor and/or Marshall.The trust has net accounting income of $50,000,none of which is tax-exempt.The trust distributes the $5,000 mandatory payment to Eleanor and also distributes discretionary amounts of $5,000 to Eleanor and $5,000 to Marshall.How much must Eleanor include in income?

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

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

A trust reports the following results: The trust must distribute all of its income annually.Calculate taxable income after the distribution deduction.

Fred,a cash-basis taxpayer,died on January 15,2012.In 2013,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)?

A trust has distributable net income (DNI)of $50,000,including $30,000 tax-exempt interest income and $20,000 taxable interest income.The trust instrument requires that all income be distributed at least annually,30% to Jane and 70% to Joe.What is the amount and character of the income that Jane receives?

An estate made a distribution to its sole beneficiary of $15,000 for the year.This distribution was not the result of a specific bequest.The estate had $40,000 of taxable interest and $34,000 of expenses attributable to earning that interest.What amount of the distribution is taxable to the beneficiary?

An inter vivos trust may be created by all of the following except

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

A simple trust has the following results: Calculate the distribution deduction.

Panther Trust has net accounting income and distributable net income of $100,000,$75,000 from taxable sources and $25,000 from tax-exempt sources.During the year,the trust makes a mandatory distribution to Julius and Steve of $50,000 each.How much of Steve's distribution is taxable?

Five years ago,Jon transferred stock to an irrevocable trust with First Bank named as trustee,and provided that the trustee is to pay some or all of the trust income to the beneficiary Dan for 15 years.At the end of the 15th year,the trust property,including any undistributed income,will revert to Jon.In the current year,the trust collected $52,000 of dividend income,and distributed $30,000 of this amount to Dan.In addition,the trust sold some of the stock at a $6,000 capital gain.For the current year,the tax results occurred?

Charitable contributions made by a fiduciary

Joyce passed away on January 3 while on an extended holiday cruise celebrating a very successful,and most profitable previous year.Joyce was the chief executive officer of the Quillip Corporation.After the independent audit of Quillip's last year's financial statements was completed in February of this year,Joyce's estate received a $1,000,000 bonus check resulting from last year's corporate profits.Joyce's estate also sold Quillip stock for $500,000 in February of this year.Joyce originally purchased this stock eight years ago for $10,000.The stock was valued at $495,000 on her date of death.Solely based on the above facts,how much income in respect of a decedent should Joyce's estate report in the current year?

Apple Trust reports net accounting income of $40,000,all from taxable sources.The trustee is required to distribute $15,000 annually to Megan.The trustee also makes discretionary distributions of $30,000,$7,500 to Megan and $22,500 to Caroline.The trust pays $5,000 of the discretionary distributions from corpus.What is the taxable amount of the Megan's tier-2 distribution?