Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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 a trust.

Accepted Answer

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

Question 3

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 4

Under IRS regulations, the decedent's estate must terminate within four years of the date of death, to minimize income-shifting techniques.

Accepted Answer

A) True 
 B)False

Question 5

Tax professionals use the terms simple trust and complex trust when dealing with fiduciary arrangements. How does one know whether a trust is simple or complex? When is this determination made?

Accepted Answer

The answer of Tax professionals use the terms simple trust...

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Distributable net income DNI) is the____________ maximum, minimum) amount that can be included in the beneficiaries' gross incomes from the fiduciary for the year.

Accepted Answer

The answer of Distributable net income DNI) is the____________ maximum,...

Question 8

Trusts can select any Federal income tax year-end.

Accepted Answer

A) True 
 B)False

Question 9

Corpus, principal, and assets of the trust are synonyms.

Accepted Answer

A) True 
 B)False

Question 10

List and discuss the three major functions of distributable net income DNI) as that amount is used under Federal income tax law.

Accepted Answer

The answer of List and discuss the three major functions...

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

A________ first-, second-, third-) tier distribution is one that the trust agreement requires to be made by the trustee to the income beneficiary.

Accepted Answer

The answer of A________ first-, second-, third-) tier distribution is...

Question 13

The Chen Trust incurred the following items during the year. What is Chen's deduction for the tax preparation fees? $\begin{array}{lr}
\text { Taxable interest received } & \$ 40,000 \
\text { Tax-exempt interest received } & 60,000 \
\text { Tax preparation fees paid } & 5,000
\end{array}$

Accepted Answer

A)  $0 
B)  $2,000 
C)  $3,000 
D)  $5,000

Question 14

Corelle is a simple trust that correctly uses the calendar year for tax purposes. Its income beneficiaries Kathie, Lynn, Mark, and Norelle) are entitled to the trust's annual accounting income in shares of one-fourth each. For the current calendar year, the trust incurs ordinary business income of $40,000, a long-term capital gain of $20,000 allocable to income), and a trustee commission expense of $4,000 allocable to corpus). Use the format of Exhibit
20.5 in the text to address the following items:
a. How much income is each beneficiary entitled to receive?
b. What is the trust's DNI?
c. What is the trust's taxable income?
d. How much is taxed to each of the beneficiaries?

Accepted Answer

The answer of Corelle is a simple trust that correctly...

Question 15

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

Accepted Answer

A)  One that is required to file Form 1041-G. 
B)  One that the grantor can revoke or otherwise amend. 
C)  One in which a member of the grantor's family is the sole trustee. 
D)  One that makes annual payments to designated charities.

Question 16

Beneficiary information concerning a trust's income and distributions are conveyed on Schedule
____________________ of the Form 1041.

Accepted Answer

The answer of Beneficiary information concerning a trust's income and...

Question 17

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 18

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

Question 19

Every simple trust is allowed a $ _________personal exemption.

Accepted Answer

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

Question 20

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.
-An estate always is created upon the death of this party.

Accepted Answer

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

Exam 20: Income Taxation of Trusts and Estates

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

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 a trust.

Under IRS regulations, the decedent's estate must terminate within four years of the date of death, to minimize income-shifting techniques.

Tax professionals use the terms simple trust and complex trust when dealing with fiduciary arrangements. How does one know whether a trust is simple or complex? When is this determination made?

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

Distributable net income DNI) is the____________ maximum, minimum) amount that can be included in the beneficiaries' gross incomes from the fiduciary for the year.

Trusts can select any Federal income tax year-end.

Corpus, principal, and assets of the trust are synonyms.

List and discuss the three major functions of distributable net income DNI) as that amount is used under Federal income tax law.

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

A________ first-, second-, third-) tier distribution is one that the trust agreement requires to be made by the trustee to the income beneficiary.

The Chen Trust incurred the following items during the year. What is Chen's deduction for the tax preparation fees? $\begin{array}{lr}\text { Taxable interest received } & \$ 40,000 \\\text { Tax-exempt interest received } & 60,000 \\\text { Tax preparation fees paid } & 5,000\end{array}$

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

Beneficiary information concerning a trust's income and distributions are conveyed on Schedule ____________________ of the Form 1041.

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.

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

Every simple trust is allowed a $ _________personal exemption.

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. -An estate always is created upon the death of this party.