Exam 28: Income Taxation of Trusts and Estates

The Moot Trust distributes an asset to its income beneficiary that shows a realized gain. What are the Federal income tax consequences of the distribution? What if the asset shows a realized loss?

A gift to charity from its 2017 income is deductible on an estate's Form 1041 if it is made by the end of the________________(2017, 2018) tax year.

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

The Jiang Trust manages investment assets that were contributed by Kong several years ago. The trust distributed one-half of its DNI this year to Kong. Kong can retain all of the trust's tax-exempt interest income if:

The Gomez Trust is required to distribute $80,000 annually, split equally between its two income beneficiaries, Lara 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 reports DNI of $60,000. Byron receives an additional $30,000 discretionary corpus distribution. a. How much of the $40,000 distributed to Lara is included in her gross income? b. How much of the $70,000 distributed to Byron is included in his gross income? c. How much of these distributions are first-tier distributions or second-tier distributions?

The Cai Trust is a calendar-year taxpayer. Its Form 1041 is due on which date in the following 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. Complex b. Decedent c. Executor d. Grantor e. Administrator f. Reversionary g. Simple h. Sprinkling i. Trustee -An estate always is created upon the death of this party.

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

The Gable Trust reports $20,000 business income and $10,000 exempt interest income, and it paid a $3,000 fiduciary fee. Gable's distributable net income includes $10,000 for the interest income.

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

When a trust distributes an in-kind asset with a realized loss, most likely this loss cannot be immediately deducted by the first-tier beneficiary.

In computing distributable net income (DNI) for a trust, one removes any net capital gain or loss that is allocable to income.

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 Sally recognize?

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

Consider the term distributable net income as it is used with respect to the Federal income taxation of trusts and estates. How is this amount computed? Where is it used in computing the parties' taxable incomes?

The Philmore Estate is subject to a 40% Federal estate tax rate and a 25% Federal and state income tax rate. Generally, an administrative expense should be claimed on the estate tax return.

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

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. Complex b. Decedent c. Executor d. Grantor e. Administrator f. Reversionary g. Simple h. Sprinkling i. Trustee -A trust whose income can be distributed to beneficiaries and in amounts at the trustee's discretion.

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

The Gable Trust reports $20,000 business income and $10,000 exempt interest income, and it paid a $3,000 fiduciary fee. Gable's distributable net income (DNI) includes $9,000 for the interest income.