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Exam 28: Income Taxation of Trusts and Estates

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Question 21

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

A) True
B) False

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Question 22

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An estate operates a manufacturing business.It can claim a domestic production activities deduction (DPAD).

A) True
B) False

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Question 23

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Like a limited liability company,the fiduciary is a tax-reporting,but not a separate tax-paying entity.

Trusts usually are required to use a calendar tax year

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

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.

The Bard Estate incurs a $25,000 fee in disposing of the real property of the decedent.The deduction can be claimed $10,000 against the Federal estate tax,and $15,000 on the estate's income tax return.

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.

List the three major functions of distributable net income (DNI)as that amount is used under Federal income tax law.

The exempt interest income of a trust usually is allocable to ____________________ beneficiaries.

By____________________ various items to entity accounting income,the will or trust determines the size of the distribution to the income beneficiaries.

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:

How is entity accounting income computed? What role does it play in Subchapter J?

The grantor of a trust generally designates both ____________________ and ____________________ beneficiaries under the controlling agreement. or

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

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

The LMN Trust is a simple trust that correctly uses the calendar year for tax purposes.Its income beneficiaries (Kathie,Lynn,Mark,and Norelle)are entitled to the trust's annual accounting income in shares of one-fourth each.For the current calendar year,the trust has ordinary business income of $30,000,a long-term capital gain of $20,000 (allocable to income),and a trustee commission expense of $4,000 (allocable to corpus).Use the format of Figure 28.3 in the text to address the following items.

The LMN Trust is a simple trust that correctly uses the calendar year for tax purposes.Its income beneficiaries (Kathie,Lynn,Mark,and Norelle)are entitled to the trust's annual accounting income in shares of one-fourth each.For the current calendar year,the trust has ordinary business income of $30,000,a long-term capital gain of $20,000 (allocable to corpus),and a trustee commission expense of $4,000 (allocable to corpus).Use the format of Figure 28.3 in the text to address the following items..

The depreciation deductions of a trust usually are allocable to ____________________ beneficiaries. or

You are responsible for the Federal income tax filings of the Tyrone Trust.Summarize the relevant due dates and filing requirements for Tyrone.