Question 1

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.

Accepted Answer

A) True 
 B)False

Question 2

The Uldis Trust reports distributable net income of $100,000 for the year and no income from tax-exempt sources. Under the terms of the trust instrument, the trustee must distribute $75,000 to Roger and $75,000 to Sally. After paying these amounts, the trustee can make additional distributions at its discretion. Exercising this authority, the Uldis trustee distributes an additional $10,000 to Roger and $30,000 to Sally. How much gross income from the trust must Sally recognize?

Accepted Answer

A)  $30,000 
B)  $50,000 
C)  $100,000 
D)  $105,000

Question 3

For each of the following independent statements, choose the best answer.
-Undistributed income is subject to the additional tax on net investment income.

Accepted 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

Question 4

The Yellow Trust incurred $10,000 of portfolio income. Its corporate trustee paid fiduciary fees of $1,000 therefrom. Yellow's accounting income is distributed as follows:
∙ $5,000 to income beneficiary Larry.
∙ $4,000 to pay part of the high school tuition bills for Carrie, the daughter of Yellow's grantor Marcia. How much gross income does Marcia include with respect to these trust activities?

Accepted Answer

A)  $0 
B)  $4,000 
C)  $9,000 
D)  $10,000

Question 5

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

Accepted Answer

A)  One that is allowed to file Form 1041-EZ. 
B)  One that has only one income beneficiary. 
C)  One whose grantor was an individual who still is alive. 
D)  One that must distribute its accounting income every year.

Question 6

The deduction for the Sharma Trust's $100,000 gift to charity is when one-third of
Sharma's accounting income for the tax year constitutes exempt interest income.

Accepted Answer

The answer of The deduction for the Sharma Trust's $100,000...

Question 7

The Whitmer Trust operates a manufacturing business. When Whitmer incurs a net operating loss, the current-year deduction passes through to the income beneficiaries.

Accepted Answer

A) True 
 B)False

Question 8

Ellie, a calendar year individual, wants to make a gift to a charity that is deductible on her year 1 Form 1040. The gift must be made by Ellie:

Accepted Answer

A)  During year 1. 
B)  During years 1 and 2. 
C)  On or before April 15, year 2. 
D)  On or before September 30, year 2.

Question 9

This year, the Suarez Trust generated distributable net income (DNI) 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 Clara?

Accepted Answer

A)  $75,000 
B)  $60,000 
C)  $45,000 
D)  $30,000

Question 10

The Ming 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?

Accepted Answer

The answer of The Ming Trust distributes an asset to...

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

One-fourth of the Cruger Estate's distributable net income consists of net long-term capital gains. Thus, when income beneficiary Susie receives a $40,000 income distribution from the estate, $10,000 of it qualifies for
the beneficial Federal income tax rate on long-term capital gains.

Accepted Answer

A) True 
 B)False

Question 13

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.

Accepted Answer

A) True 
 B)False

Question 14

Harry, the sole income beneficiary, received a $40,000 distribution from the Lucy Trust in a year when the trust's distributable net income was $50,000. Harry's AGI can increase by as much as $50,000.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A)  Modify the language of the trust instrument so as to lower the entity's Federal income tax. 
B)  Make decisions as to how to invest the trust corpus portfolio. 
C)  Allocate items between income and corpus using Subchapter J rules. 
D)  All of these.

Question 16

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

Accepted Answer

The answer of The Form 1041 of a calendar year...

Question 17

Usually, a beneficiary takes a carryover basis when a trust distributes a noncash asset.

Accepted Answer

A) True 
 B)False

Question 18

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.
-The fiduciary in charge of an estate.

Accepted Answer

A) Complex 
B) Decedent 
C) Executor 
D) Grantor 
E) Administrator
F)Reversionary
G)Simple
H)Sprinkling
I)Trustee

Question 19

When a beneficiary receives a distribution from a trust of an asset other than cash, the realized loss generally is
(recognized, not recognized) by the trust.

Accepted Answer

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

Question 20

For each of the following independent statements, choose the best answer.
-The entity is an information-reporting, not a tax-paying, taxpayer.

Accepted 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

Exam 28: Income Taxation of Trusts and Estates

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.

For each of the following independent statements, choose the best answer. -Undistributed income is subject to the additional tax on net investment income.

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

The deduction for the Sharma Trust's $100,000 gift to charity is when one-third of Sharma's accounting income for the tax year constitutes exempt interest income.

The Whitmer Trust operates a manufacturing business. When Whitmer incurs a net operating loss, the current-year deduction passes through to the income beneficiaries.

Ellie, a calendar year individual, wants to make a gift to a charity that is deductible on her year 1 Form 1040. The gift must be made by Ellie:

The Ming 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?

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

One-fourth of the Cruger Estate's distributable net income consists of net long-term capital gains. Thus, when income beneficiary Susie receives a $40,000 income distribution from the estate, $10,000 of it qualifies for the beneficial Federal income tax rate on long-term capital gains.

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.

Harry, the sole income beneficiary, received a $40,000 distribution from the Lucy Trust in a year when the trust's distributable net income was $50,000. Harry's AGI can increase by as much as $50,000.

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

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

Usually, a beneficiary takes a carryover basis when a trust distributes a noncash asset.

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. -The fiduciary in charge of an estate.

When a beneficiary receives a distribution from a trust of an asset other than cash, the realized loss generally is (recognized, not recognized) by the trust.

For each of the following independent statements, choose the best answer. -The entity is an information-reporting, not a tax-paying, taxpayer.