Exam 20: Income Taxation of Trusts and Estates

The Bard Estate incurs a $25,000 fee in disposing of the real property of the decedent. The deduction is claimed against the Federal estate tax, unless by election it is claimed on the estate's income tax return.

A complex trust can claim a Year 1 deduction for a gift to charity, where the contribution was made on October 20 of Year 2 out of gross income recognized in Year 1.

With respect to a trust, the terms creator, donor, and grantor are synonyms.

To reduce trustee commissions, the Sigrid Trust is operated as though it were two trusts (i.e., with 70-year-old Grandma and 7-year old Skippy each holding equal shares). This year the trust generated distributable net income (DNI) of $80,000. The Sigrid trustee distributed $100,000 to Grandma this year: $40,000 as her one-half share of the entity's income, and $60,000 as a distribution of principal. Skippy received no distribution. How much of the year's distributable net income is assigned to Grandma?

The depreciation deductions of a trust usually are allocable to ____________________ beneficiaries. or

Which of the following is a typical duty of a trustee?

The grantor set up a trust, income to a daughter, remainder to a grandson. To the extent that trust income is used to pay a life insurance premium on the grantor's spouse, Subchapter J rules are ignored, and the income is taxed to the grantor.

"First-tier distributions" allowed by the will or trust document are made at the discretion of the executor or trustee.

A complex trust may incur a liability for the AMT.

Tax planning usually dictates that high-income and -wealth individuals be specified as first-tier beneficiaries of a trust arrangement.

The accounting income of a trust is distributed to the grantor's ex-spouse, in satisfaction of the year's alimony obligation. The ____________________ is taxed on the amount of the distribution.

Remainder beneficiary Shelley receives a $50,000 net operating loss carryover when the Malone Trust terminates. Shelley deducts this amount ____________________ (for/from) AGI on her Form 1040.

The Code defines a grantor trust as which of the following?

The grantor of a trust generally designates both ____________________ and ____________________ beneficiaries under the controlling agreement. or

The Cooper Trust is required to distribute $80,000 annually, split equally between its two income beneficiaries, Amber and Byron. If trust income is not sufficient to pay these amounts, the trustee can invade corpus to the extent necessary. During the current year, the trust has DNI of $50,000. Byron receives an additional $20,000 discretionary corpus distribution.

A fiduciary's distribution deduction shifts the tax burden for current-year income from the entity to the beneficiary.

Jose is subject to the top marginal Federal income tax rates. Carlita is considering establishing a trust in which Jose would be an income beneficiary. Considering only income tax consequences, Jose should be designated as:

The distributable net income (DNI) of a fiduciary taxpayer:

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

Every ____________________ trust is allowed a $300 personal exemption.