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Exam 28: Income Taxation of Trusts and Estates

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Question 51

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

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Question 52

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When a beneficiary receives a distribution from a trust of an asset other than cash,the realized loss could be disallowed under the ____________________ rule.

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Question 53

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Which,if any,of the following statements relates to the tax treatment of both estates and trusts?

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

The Roz 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 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 $40,000 to Roger and $40,000 to Sally.How much income from the trust must Sally recognize?

One trust that is operated independently for each of its three beneficiaries might be taxed using the ____________________ rule.

Explain how the Federal income tax law applies to a fiduciary entity like a trust.Is the tax structure similar to that of an individual? A partnership?

With respect to a trust,the terms creator,donor,and grantor are synonyms.

The Drabb Trust owns a plot of business-related land,basis of $50,000,fair market value of $35,000.Drabb is subject to a 35% marginal income tax rate.Its sole beneficiary,Eddie,is subject to a 15% marginal income tax rate.Drabb's current-year distributable net income is $95,000.What is the most preferable action for the trustee of Drabb to take,considering only the related tax consequences?

Cost recovery deductions are assigned pro rata to the recipients of an estate's distributable net income (DNI).

The deduction for the Goodman Trust's $100,000 gift to charity is ____________________ when one-fourth of Goodman's accounting income for the tax year is exempt interest income.

The Yan Estate is your client,as are many of the decedent's family members.Determine the tax effects of the indicated losses for the Yan Estate for both tax years.The estate holds a variety of investment assets,which it received from the decedent,Mrs.Yan.The estate's sole income and remainder beneficiary is Yan,Jr.

The Williamson Estate generated distributable net income (DNI) this year of $120,000,one-third of which was tax-exempt interest,and the balance of which was long-term capital gain.Muffy Williamson,the sole income beneficiary of the estate,received a distribution of the entire $150,000 accounting income of the entity.How is this distribution accounted for by Muffy?

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?

The Bedford 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 $30,000 to Roger and $60,000 to Sally.After payment of these amounts,the trustee is empowered to make additional distributions at its discretion.Exercising this authority,the Bedford trustee distributes an additional $40,000 to Roger,and $40,000 to Sally.How much income from the trust must Sally recognize?

In computing distributable net income (DNI)for a trust,one removes any corpus net capital gain or loss.

The IRS encourages ____________________ filing for Forms 1041.

A Form 1041 must be filed by an estate that recognizes $____________________ or more gross income for the tax year.

What is meant by the term "distributable net income?" What is its significance in connection with the income taxation of estates,trusts and their beneficiaries?

The Cooper Trust is required to distribute $80,000 annually,split equally between its two income beneficiaries,Amber and Byron.If trust income is not sufficient to pay these amounts,the trustee can invade corpus to the extent necessary.During the current year,the trust has DNI of $50,000.Byron receives an additional $20,000 discretionary corpus distribution.