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Exam 20: Income Taxation of Trusts and Estates

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Question 81

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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 synonym for executor.

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

J) F) and G)
K) D) and E)

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Question 82

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The trust instrument indicates whether cost recovery is __________to fiduciary accounting income, thereby reducing the amount of the distribution to the income beneficiary.

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Question 83

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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.

When a trust operates a trade or business, it can claim a deduction for wages paid to employees.

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 Clark?

The Prakash Trust is required to pay its entire annual accounting income to the Daytona Museum, a qualifying charity. The trust's personal exemption is:

Your client Ming is a complex trust that operates exclusively in the United States. Make a list of five or more tax planning opportunities that you might suggest to Ming.

The Doyle 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 $30,000 to Roger and $30,000 to Sally. After payment of these amounts, the trustee can make additional distributions at its discretion. Exercising this authority, the trustee distributes an additional $25,000 to Roger and $25,000 to Sally. How much income from the trust must Sally recognize?

A trust might be used when a married couple is divorcing.

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

Income beneficiary Turk received $30,000 from the Urgent Trust. Trust accounting income for the year was $100,000. The trust generated $20,000 in cost recovery deductions. How much can Turk deduct with respect to the cost recovery deductions that Urgent generated?

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

This year, the Nano Trust reported $50,000 entity accounting income and $40,000 distributable net income DNI) . Nano distributed $60,000 cash to Horatio, its sole income beneficiary. Nano is a simple trust. Nano's distribution deduction is:

For the year, the Brighton Trust has distributable net income of $100,000 and no income from tax-exempt sources. Under the terms of the trust instrument, the trustee is required to distribute $25,000 to Roger and $50,000 to Sally. After payment of these amounts, the trustee can make additional distributions at its discretion. Exercising this authority, the Brighton trustee distributes an additional $20,000 to Roger, and $30,000 to Sally. How much income from the trust must Sally recognize?

A Form 1041 must be filed by a trust that has $________ or more gross income for the tax year.

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

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.

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?

The Yellow Trust incurred $10,000 of portfolio income. Its corporate trustee paid fiduciary fees of $1,000 therefrom, and also paid $1,000 in premiums for a life insurance policy on Marcia, the grantor of the trust. How much gross income does Marcia include with respect to these trust activities?

For each of the following independent statements, choose the best answer. -The entity's management generally is directed by the controlling document as to the date of the entity's termination.