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Exam 20: Income Taxation of Trusts and Estates

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Question 61

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

A) Special allocations are not allowed under Subchapter J.
B) Special allocations are allowed, but only in the trust's termination year.
C) Special allocations are allowed, but only for portfolio income items.
D) Special allocations of income types are allowed, assuming that they carry a substantial economic effect.

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

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Question 62

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The Form 1041 of a calendar-year trust is due on ____________________ 15 (not including extensions) of the following year.

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Question 63

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The Stratford Estate incurs a $25,000 casualty loss in disposing of the real property of the decedent. The deduction is claimed against the Federal estate tax, unless by election it is claimed on the estate's income tax return.

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

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.

The Gable Trust reports $20,000 business income and $10,000 exempt interest income, and it paid a $3,000 fiduciary fee. Gable's distributable net income includes $10,000 for the interest income.

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:

The Chen Trust incurred the following items during the year. What is Chen's deduction for the tax preparation fees?

The Griffin Trust makes a gift of long-term capital gain property to a qualifying charity. Griffin's entity-level deduction cannot exceed 30% of distributable net income.

Tax planning usually dictates that high-income and high-wealth individuals be specified as second-tier beneficiaries of a trust arrangement.

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 $30,000 to Roger and $30,000 to Sally. After payment of 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 $25,000 to Sally. How much income from the trust must Sally recognize?

The Yellow Trust incurred $10,000 of portfolio income. Its corporate trustee paid fiduciary fees of $1,000 therefrom. Yellow's accounting income is distributed as follows. ∙ $5,000 to income beneficiary Larry ∙ $4,000 to pay part of the high school tuition bills for Carrie, the daughter of Yellow's grantor Marcia How much gross income does Marcia include with respect to these trust activities?

The Malik Estate operates a manufacturing business. Malik made no income distributions this year. It can claim a domestic production activities deduction (DPAD).

A fiduciary's cost recovery deductions are assigned corresponding to the disposition of entity ____________________ income for the year.

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 can increase by as much as $40,000.

The first step in computing an estate's taxable income is the determination of its fiduciary accounting income for the year.

The Julius Trust made a gift to the United Charity on August 1, Year Two, from its Year One business profits. The trust's charitable contribution deduction can be claimed in either Year One or Year Two.

The Gable Trust reports $20,000 business income and $10,000 exempt interest income, and it paid a $3,000 fiduciary fee. Gable's distributable net income includes $10,000 of net tax-exempt income.

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