Question 1

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

Accepted Answer

A)  The termination date of the entity is specified in the controlling document. 
B)  The entity must use the same tax year as its creator (i.e., grantor, decedent). 
C)  The entity is required to distribute all of its income currently to its beneficiaries. 
D)  In the year of its termination, the entity's net operating loss carryovers are passed through to its beneficiaries. 
A)  The termination date of the entity is specified in the controlling document. 
B)  The entity must use the same tax year as its creator (i.e., grantor, decedent). 
C)  The entity is required to distribute all of its income currently to its beneficiaries. 
D)  In the year of its termination, the entity's net operating loss carryovers are passed through to its beneficiaries.

Question 2

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

Accepted Answer

The answer of When a beneficiary receives a distribution from...

Question 3

During the current year, the Santo Trust received $30,000 of taxable interest income, paid trustee's commissions of $3,000, and had no other income or expenses. The Santo trust instrument requires that $20,000 be paid annually to Marilyn, and $40,000 be paid annually to Domingo. How much gross income must Marilyn and Domingo recognize?

Accepted Answer

A)  $20,000 by Marilyn and $40,000 by Domingo. 
B)  $15,000 by Marilyn and $15,000 by Domingo. 
C)  $13,500 by Marilyn and $13,500 by Domingo. 
D)  $9,000 by Marilyn and $18,000 by Domingo. 
A)  $20,000 by Marilyn and $40,000 by Domingo. 
B)  $15,000 by Marilyn and $15,000 by Domingo. 
C)  $13,500 by Marilyn and $13,500 by Domingo. 
D)  $9,000 by Marilyn and $18,000 by Domingo.

Question 4

The Suarez Trust generated distributable net income (DNI) this year of $150,000, two-thirds of which was portfolio income, and the balance of which was exempt interest. Under the terms of the trust, Clara Suarez is to receive an annual income distribution of $30,000. At the discretion of the trustee, additional distributions can be made to Clara, or to Clark Suarez III. This year, the trustee's distributions to Clara totaled $60,000. Clark received $90,000. How much of the trust's DNI is assigned to Clark?

Accepted Answer

A)  $0, only first-tier distributions are subject to Federal income tax. 
B)  $60,000 
C)  $75,000 
D)  $90,000 
A)  $0, only first-tier distributions are subject to Federal income tax. 
B)  $60,000 
C)  $75,000 
D)  $90,000

Question 5

Beginning with its ________________ tax year, an estate must remit quarterly Federal estimated income tax payments.

Accepted Answer

third (for tax years

Question 6

Generally, an estate's taxable income is computed in a manner similar to that used for a(n)____________________.

Accepted Answer

The answer of Generally, an estate's taxable income is computed...

Question 7

The Zhao Estate generated distributable net income (DNI) this year of $100,000, one-fourth of which was tax- exempt interest, and the balance of which was long-term capital gain. Kyle Zhao, the sole income beneficiary of the estate, received a distribution of the entire $125,000 accounting income of the entity. How does Kyle report the distribution?

Accepted Answer

A)  $75,000 long-term capital gain, $25,000 exempt interest. 
B)  $50,000 long-term capital gain, $50,000 exempt interest. 
C)  $75,000 long-term capital gain, $25,000 ordinary income. 
D)  $93,750 long-term capital gain, $31,250 exempt interest. 
A)  $75,000 long-term capital gain, $25,000 exempt interest. 
B)  $50,000 long-term capital gain, $50,000 exempt interest. 
C)  $75,000 long-term capital gain, $25,000 ordinary income. 
D)  $93,750 long-term capital gain, $31,250 exempt interest.

Question 8

Every simple trust is allowed a ________________ $ personal exemption.

Accepted Answer

The answer of Every simple trust is allowed a ________________...

Question 9

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

Accepted Answer

The distribution deduction for an estate

Question 10

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 Roger recognize?

Accepted Answer

A)  $50,000 
B)  $45,000 
C)  $40,000 
D)  $20,000 
A)  $50,000 
B)  $45,000 
C)  $40,000 
D)  $20,000

Question 11

Which of the following is a typical duty of an executor of an estate?

Accepted Answer

A)  Pay funeral expenses. 
B)  Pay off the decedent's financial liabilities. 
C)  Distribute the net assets of the probate estate. 
D)  Manage the decedent's assets until they are liquidated or distributed. 
E)  All of the above. 
A)  Pay funeral expenses. 
B)  Pay off the decedent's financial liabilities. 
C)  Distribute the net assets of the probate estate. 
D)  Manage the decedent's assets until they are liquidated or distributed. 
E)  All of the above.

Question 12

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

Accepted Answer

The answer of A fiduciary's cost recovery deductions are assigned...

Question 13

For each of the following independent statements, choose the best answer.
a. Tax attribute of complex trusts only 
b. Tax attribute of estates only
c. Tax attribute of estates and complex trusts
d. Tax attribute of neither estates nor complex trusts
-For a calendar-year entity, the Form 1041 has an unextended due date of April 15.

Accepted Answer

The answer of For each of the following independent statements,...

Question 14

The Chen Trust is required to distribute its accounting income every year, one-half to Missy Chen, and one-half to the local church's homeless shelter. What is the Chen Trust's personal exemption?

Accepted Answer

A)  $0 
B)  $100 
C)  $300 
D)  $600 
A)  $0 
B)  $100 
C)  $300 
D)  $600

Question 15

Your client Pryce is one of the income beneficiaries of the Santiago Trust. Pryce says to you, "I want all of the exempt interest income from Santiago to be allocated to me, as I am the income beneficiary who is subject to the highest marginal Federal income tax rate." How do you respond to Pryce's request?

Accepted Answer

Special allocations of DNI are allowed o

Question 16

If provided for in the controlling agreement, a trust might terminate when the income beneficiary reaches age 35.

Accepted Answer

A) True 
 B)False

Question 17

You are responsible for the Federal income tax filings of the Tyrone Trust. Summarize the relevant due dates and filing requirements for Tyrone.

Accepted Answer

A Form 1041 is required if the estate or

Question 18

For each of the following independent statements, choose the best answer.
a. Tax attribute of complex trusts only 
b. Tax attribute of estates only
c. Tax attribute of estates and complex trusts
d. Tax attribute of neither estates nor complex trusts
-The entity typically can choose any fiscal tax year.

Accepted Answer

The answer of For each of the following independent statements,...

Question 19

Trusts can select any Federal income tax year-end.

Accepted Answer

A) True 
 B)False

Question 20

The tax rules regarding the income taxation of trusts and estates are included in which Subchapter of the Internal Revenue Code?

Accepted Answer

A)  C 
B)  J 
C)  K 
D)  S 
A)  C 
B)  J 
C)  K 
D)  S

Exam 28: Income Taxation of Trusts and Estates

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

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

Beginning with its ________________ tax year, an estate must remit quarterly Federal estimated income tax payments.

Generally, an estate's taxable income is computed in a manner similar to that used for a(n)____________________.

Every simple trust is allowed a ________________ $ personal exemption.

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

Which of the following is a typical duty of an executor of an estate?

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

The Chen Trust is required to distribute its accounting income every year, one-half to Missy Chen, and one-half to the local church's homeless shelter. What is the Chen Trust's personal exemption?

If provided for in the controlling agreement, a trust might terminate when the income beneficiary reaches age 35.

You are responsible for the Federal income tax filings of the Tyrone Trust. Summarize the relevant due dates and filing requirements for Tyrone.

Trusts can select any Federal income tax year-end.

The tax rules regarding the income taxation of trusts and estates are included in which Subchapter of the Internal Revenue Code?

An Introduction to Taxation and Understanding the Federal Tax Law

Working with the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: In General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges

Property Transactions: Capital Gains and Losses, Section 1231, and Recapture Provisions

Taxing Business Income

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Filters