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Exam 28: Income Taxation of Trusts and Estates

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Question 21

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Bob is one of the income beneficiaries of the LaQuanda Estate, which is subject to a 45% marginal Federal estate tax rate, a 35% marginal Federal income tax rate, and a 5% marginal state income tax rate.This year, Bob received all of the sales commissions that were earned and payable to Lulu LaQuanda (cash basis) at her death.Compute Bob's § 691(c) deduction for the current year, given the following data.

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Net IRD = $60,000 income receivable (IRD...

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Question 22

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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 15% tax rate.

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Question 23

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Tax planning motivations usually are secondary to other objectives in deciding whether to create a trust.

An estate ____________________ (can/cannot) be liable for a Federal alternative minimum tax.

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

The Willa estate reports $100,000 DNI, composed of $50,000 dividends, $20,000 taxable interest, $10,000 passive income, and $20,000 tax-exempt interest.Willa's two noncharitable income beneficiaries, Shanna and Tom, receive distributions of $75,000 each.How much of each class of income is deemed to have been distributed to Shanna? To Tom? Use the following template to structure your answer.

An example of income in respect of a decedent is the taxpayer's last paycheck, uncollected at death.

The Gomez Trust is required to distribute $80,000 annually, split equally between its two income beneficiaries, Lara and Byron.If trust income is not sufficient to pay these amounts, the trustee can invade corpus to the extent necessary.During the current year, the trust has DNI of $60,000.Byron receives an additional $30,000 discretionary corpus distribution.

The Leonardo Estate operates a business and generates cost recovery deductions. Which taxpayer(s), if any, can deduct these items, e.g., the deceased, the estate, the income or remainder beneficiaries?

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?

In computing the Federal taxable income of a trust, a modified ____________________ approach is used. or

The Griffin Trust makes a gift to a qualifying charity. Griffin's entity-level deduction is allowed only to the extent of 50% of distributable net income.

Like a corporation, the fiduciary reports and pays its own Federal income tax liability.

A fiduciary entity computes its alternative minimum tax in a manner similar to that used for a(n) ____________________.

A Form 1041 must be filed by an estate that recognizes $____________________ or more gross income for the tax year.

A ____________________ trust is a revocable entity that is used to avoid probate upon the death of the grantor.

An estate operates a manufacturing business. It can claim a domestic production activities deduction (DPAD).

The Rodriguez Trust generated $300,000 in alternative minimum taxable income (AMTI) this year.The trust is subject to a marginal Federal income tax rate of:

The Crown Trust distributed one-half of its accounting income to Lee this year.Lee also is allocated one-half of Crown's credit for building low-income housing.

The Bard Estate incurs a $25,000 fee in disposing of the real property of the decedent. The deduction is claimed against the Federal estate tax, unless by election it is claimed on the estate's income tax return.