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Exam 28: Income Taxation of Trusts and Estates

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Question 31

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For each of the following independent statements, choose the best answer. a.Tax attribute of complex trusts only b.Tax attribute of estates only c.Tax attribute of estates and complex trusts d.Tax attribute of neither estates nor complex trusts -The entity is controlled by Federal-level probate laws.

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Question 32

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When a trust operates a trade or business,it can claim a deduction for wages paid to employees.

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B) False

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Question 33

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

In computing the Federal taxable income of a trust,the ____________________ (first,last) step is to determine its fiduciary accounting income.

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

The Gomez Trust is required to distribute $80,000 annually,split equally between its two income beneficiaries,Lara 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 reports DNI of $60,000.Byron receives an additional $30,000 discretionary corpus distribution. a.How much of the $40,000 distributed to Lara is included in her gross income? b.How much of the $70,000 distributed to Byron is included in his gross income? c.How much of these distributions are first-tier distributions or second-tier distributions?

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 trust might be used when a married couple is divorcing.

Estates and trusts can claim Federal income tax deductions for costs incurred in maintaining investments in U.S.state and local bonds.

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

Income beneficiary Molly wants to receive all of the municipal bond interest income of the Brenner Trust.A special allocation of this sort must be supported by a non-tax ____________________.

The Federal income taxation of a trust or estate has been described as a "modified pass-through" system.Compare fiduciary income tax rules to those that apply to LLCs and to individuals.

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

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.Complex b.Decedent c.Executor d.Grantor e.Administrator f.Reversionary g.Simple h.Sprinkling i.Trustee -A trust whose income is taxed to the donor,not the beneficiaries.

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

When DNI includes exempt interest income,the beneficiary includes less than the full amount of DNI in current-year gross income.

The Zhong Trust is a calendar-year taxpayer.Its Form 1041 is due on which date in the following year?

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?

For each of the following independent statements, choose the best answer. a.Tax attribute of complex trusts only b.Tax attribute of estates only c.Tax attribute of estates and complex trusts d.Tax attribute of neither estates nor complex trusts -Undistributed income is subject to the additional tax on net investment income.

Does the estate or trust's distributable net income always equal its deduction for distributions to beneficiaries? Are the two amounts ever equal in amount? Answer for estates,simple trusts,and complex trusts.