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Exam 20: Income Taxation of Trusts and Estates

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Question 51

Multiple Choice

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Ellie Inc., a calendar year C corporation, wants to make a gift to a charity that is deductible on its year 1 Form 1120. The gift must be made by Ellie:

A) During year 1.
B) During year 1 or 2.
C) On or before April 15, year 2.
D) On or before September 30, year 2.

E) C) and D)
F) B) and D)

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Question 52

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A complex trust pays tax on the income that it accumulates i.e., that it does not distribute).

A) True
B) False

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Question 53

Multiple Choice

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This year, the Nano Trust reported $50,000 entity accounting income and $40,000 distributable net income DNI) . Nano distributed $30,000 cash to Horatio, its sole income beneficiary. Nano is a complex trust. Nano's distribution deduction is:

Three months after Brianna Timkin died, her executor received the final $40,000 installment from a sale of land that Brianna completed several years ago. Which of the following statements is true?

An estate's remainder beneficiary generally must wait until the entity is terminated by the executor to receive any distributions.

The Prakash Estate has equal income beneficiaries Sam and Janet. As allowed by the terms of the will, the estate makes no income distributions during the current tax year. The estate's personal exemption is:

Income is taxed to the creator of an) ___________trust instead of to the entity.

The distributable net income DNI) of a fiduciary taxpayer:

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?

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?

For the year, the Uldis Trust has distributable net income DNI) of $100,000 and no income from tax-exempt sources. Under the terms of the trust instrument, the trustee must distribute $75,000 to Roger and $75,000 to Sally. After paying these amounts, the trustee can make additional distributions at its discretion. Exercising this authority, the Uldis trustee distributes an additional $10,000 to Roger and $30,000 to Sally. How much gross income from the trust must Roger recognize?

The Jiang Trust operates a manufacturing business. Yan created the trust several years ago by contributing a successful sole proprietorship. The trust distributed one-half of its DNI this year to Yan. Yan can retain all of the trust's depreciation deductions if:

Which of the following is a typical duty of an executor of an estate?

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 $30,000. Harry's AGI increases by $40,000.

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.

Which of the following taxpayers can be subject to an entity-level Federal income tax?

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.

Marcus has been determined to be a grantor trust by the IRS. Your tax partner explains that this probably happened because the donor of the trust assets retained excessive powers over the operation of the trust or the use of its assets and income. To what powers is your tax partner referring?

This year, the Zhao Estate generated distributable net income DNI) of $100,000, one-fourth of which was tax- exempt interest, and the balance of which was long-term capital gain. Kyle Zhao, the sole income beneficiary of the estate, received a distribution of the entire $125,000 accounting income of the entity. How does Kyle report the distribution?

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.