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Exam 28: Income Taxation of Trusts and Estates

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Question 21

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With respect to a trust's timely filed Form 1041, the IRS will accept:

A) Only paper returns.
B) Only e-filed returns.
C) Returns either on paper or in electronic form.
D) Only e-filed returns if gross income exceeds $5,000 for the tax year.

E) B) and C)
F) None of the above

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Question 22

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List at least three non-tax reasons that you might suggest to your client Connie that she should consider shifting some income and assets to a trust.

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Trusts often are used to shift managemen...

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Question 23

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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?

For each of the following independent statements, choose the best answer. -The entity is an information-reporting, not a tax-paying, taxpayer.

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.

Consider the term fiduciary accounting income as it is used with respect to the Federal income taxation of trusts and estates. How is this amount computed? Where is it used in computing the parties' taxable incomes?

Your client Pryce is one of the income beneficiaries of the Santiago Trust. Pryce says to you, "I want all of the exempt interest income from Santiago to be allocated to me, as I am the income beneficiary who is subject to the highest marginal Federal income tax rate." How do you respond to Pryce's request?

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

Consider the term distributable net income as it is used with respect to the Federal income taxation of trusts and estates. How is this amount computed? Where is it used in computing the parties' taxable incomes?

If provided for in the controlling agreement, a trust might terminate when the income beneficiary reaches age 35.

The distributable net income (DNI) of a fiduciary taxpayer:

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

A (first, second, third) -tier distribution is one that the trust agreement requires to be made by the trustee to the income beneficiary.

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.

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 low­income housing.

A fiduciary assigns its tax credits to beneficiaries corresponding to the disposition of its income for the year.

The Brighton Trust has 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 is required to distribute $25,000 to Roger and $50,000 to Sally. After payment of these amounts, the trustee is empowered to 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?

For each of the following independent statements, choose the best answer. -The entity is controlled by Federal-level probate laws.

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.

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.