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Exam 28: Income Taxation of Trusts and Estates

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Question 21

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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) E) and H)
K) D) and I)

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Question 22

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The Circle Trust reports some exempt interest income for the year. How does this investment income affect Circle's deduction of its fiduciary fees? Charitable contributions?

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A proportionate amount of the deduction ...

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Question 23

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The unextended due date for a calendar year trust to file its Form 1041 is March 15.

When DNI includes exempt interest income, the beneficiary includes less than the full amount of DNI in current- year gross income.

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 remainder beneficiary is its grantor.

The Yeoman Trust has generated several Federal income tax credits for this tax year. Which taxpayer(s), if any, can use these credits in computing a Federal income tax liability? (e.g., the grantor, the trust, its income beneficiaries, its remainder beneficiaries) Answer for estates, simple trusts, and complex trusts.

Which of the following restrictions applies concerning distributions to trust beneficiaries?

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

Which of the following taxpayers use a Schedule K and K-1 to pass through income, loss, and credit amounts to the owners or beneficiaries?

For each of the following independent statements, choose the best answer. -For a calendar year entity, the Form 1041 has an unextended due date of April 15.

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?

Generally, capital gains are allocated to fiduciary income, because they arise from current-year transactions as directed by the trustee.

Every simple trust is allowed a $ personal exemption.

The Ellie Trust, a calendar year entity, wants to make a gift to a charity that is deductible on its year 1 Form 1041. The gift must be made by Ellie:

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 that is required to distribute annual accounting income.

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 $20,000 to Roger and $20,000 to Sally. After paying these amounts, the trustee can 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?

For each of the following independent statements, choose the best answer. -A decedent created the entity.

A trust holds assets that will generate net investment income (NII) and trigger the additional Medicare taxes. The trustee should:

When a trust distributes an in-kind asset with a realized loss, this loss most likely cannot be immediately deducted by the first-tier beneficiary.

Judy can claim one-third of the Sweet Estate's cost recovery deductions, because she received one-third of the fiduciary's distributable net income (DNI).