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Exam 28: Income Taxation of Trusts and Estates

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Question 41

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When the Holloway Trust terminated this year, it held a $1 million NOL carryforward. How is the loss carryforward treated? Does it expire with the trust or can another taxpayer use it? Be specific.

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In the year in which a fiduciary entity ...

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Question 42

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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 $50,000. Harry's AGI can increase by as much as $50,000.

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Question 43

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The Uldis 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 $75,000 to Roger and $75,000 to Sally. After paying these amounts, the trustee is empowered to 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 Sally recognize?

Reggie is one of the income beneficiaries of the LaQuanda Estate, which is subject to a 35% marginal Federal estate tax rate, a 35% marginal Federal income tax rate, and a 10% marginal state income tax rate. This year, Reggie received all of the sales commissions that were earned and payable to Lulu LaQuanda (cash basis) at her death. Compute Reggie's § 691(c) deduction for the current year, given the following data. Sales commissions receivable $50,000 Deferred gain on installment sale, three payments to be received, starting next year 20,000

Under IRS regulations, the decedent's estate must terminate within four years of the date of death, so as to minimize income-shifting techniques.

The Moot 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?

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

Under the Federal income tax rules for trusts and estates, a(n) generally must use a calendar tax year, but a(n) can select any tax year-end.

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.

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

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

For each of the following independent statements, choose the best answer. -The entity can choose between the cash and accrual methods of reporting its income and deductions.

The Stratford Estate incurs a $25,000 legal fee in disposing of the real property of the decedent. The executor can decide to claim a $5,000 deduction against the Federal estate tax, and a $20,000 deduction on the estate's income tax return.

Every simple trust is allowed a $ personal exemption.

Identify the parties that are present when an estate is created, and their key duties. Then do the same for a trust.

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 fiduciary in charge of an estate.

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

Tax professionals use the terms simple trust and complex trust when dealing with fiduciary arrangements. How does one know whether a trust is "simple" or "complex?" When is this determination made?

Usually, a beneficiary takes a carryover basis when a trust distributes a non-cash asset.

Which of the following is a typical duty of a trustee?