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Exam 20: Income Taxation of Trusts and Estates

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Question 41

True/False

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Sixty percent of the income received by the Atom Trust this year constituted municipal bond interest. Atom's trustee also made a $100,000 gift to the United Fund, a qualifying charity. The charitable deduction associated with this gift is limited to $60,000.

A) True
B) False

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Question 42

Multiple Choice

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The Prakash Trust is required to pay its entire annual accounting income to the Daytona Museum, a qualifying charity. The trust's personal exemption is:

A) $0.
B) $100.
C) $300.
D) $600.

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

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Question 43

Multiple Choice

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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?

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

In computing distributable net income (DNI) for a trust, one removes any net capital gain or loss that is allocable to 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 income is taxed to the donor, not the beneficiaries.

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?

Olsen has been determined to be a grantor trust by the IRS. What are the tax consequences of this tax status? What are the tax return filing requirements for Olsen and for Peggy, the donor of the trust's assets?

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

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

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

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?

Which of the following is the annual maximum amount to be included as gross income by all of the income beneficiaries of the trust or estate?

A complex trust automatically is exempt from the Federal AMT.

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.

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.

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

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?

A fiduciary's distribution deduction shifts the tax burden for the distributed amount of current-year income from the entity to the beneficiary.

For each of the following independent statements, choose the best answer. -The person who transfers assets to a trust.