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Exam 28: Income Taxation of Trusts and Estates

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Question 51

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For each of the following independent statements, choose the best answer. -The entity typically can choose any fiscal tax year.

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

E) A) and B)
F) A) and C)

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Question 52

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The rental income of a trust usually is allocable to (income, remainder) beneficiaries.

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Question 53

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For each of the following independent statements, choose the best answer. -The entity must file an income tax return if its gross income for the year is $600 or more.

Three weeks after Abed died, his brother Tony properly received Abed's last paycheck from his employer. The gross amount of the check was $4,000, and a $300 deduction for state income taxes was subtracted in computing the net amount of the payment. Which of the following statements about the $300 is true?

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.

Entity accounting income is controlled by the terms of the for an estate or the ____________________ for a trust.

The Whitmer Trust operates a manufacturing business and distributes the profits to its income beneficiaries. Whitmer also passes through to the income beneficiaries the data needed to compute their deduction for qualified business income.

The present value of a trust's Federal income tax liability is reduced when:

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 of net-tax interest income.

Under the Federal income tax rules for trusts and estates, a(n) generally must use a calendar tax year, but a(n) can select any tax year-end.

The Prakash Trust is required to pay its entire annual accounting income to beneficiaries Sam and Janet. The trust's personal exemption is:

List at least three nontax reasons that you might suggest to your client Chan that she should consider shifting some income and assets to a trust.

The Willis Trust instrument provides that Tamara, the sole income beneficiary, is to receive $40,000 annually. If trust accounting income is not sufficient to pay this amount, the Willis trustee is empowered to invade corpus to the extent necessary. During the current year, the trust reports distributable net income (DNI) of $100,000, including $30,000 of net tax-exempt interest. In accordance with the trust instrument, $40,000 is paid to Tamara. What is Tamara's gross income from the Willis Trust for the current year?

The trustee of the Epsilon Trust distributed an asset to Telly, a qualifying income beneficiary. The asset's basis to the trust was $10,000, and its fair market value on the distribution date was $25,000. Which of the following statements is true?

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 trust whose income is taxed to the donor, not the beneficiaries.

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

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 of net tax-exempt interest income.

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

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 increases by $40,000.

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 person who transfers assets to a trust.