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Exam 28: Income Taxation of Trusts and Estates

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Question 41

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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 ____________________.

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Question 42

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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 $50,000.Harry's AGI can increase by as much as $50,000.

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Question 43

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Three weeks after Abed died, his brother Tony properly received Abed's last paycheck from his employer.The gross amount of the check was $4,000, and a $300 deduction for state income taxes was subtracted in computing the net amount of the payment.Which of the following statements is true?

The Suarez Trust generated distributable net income (DNI) this year of $150,000, one-third of which was portfolio income, and the balance of which was exempt interest.Under the terms of the trust, Clara Suarez is to receive an annual income distribution of $30,000.At the discretion of the trustee, additional distributions can be made to Clara or to Clark Suarez III.This year, the trustee's distributions to Clara totaled $90,000.Clark also received $90,000.How much of the trust's DNI is assigned to Clara?

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

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

Your client Pryce is one of the income beneficiaries of the Santiago Trust. Pryce says to you, "I want all of the exempt interest income from Santiago to be allocated to me, as I am the income beneficiary who is subject to the highest marginal Federal income tax rate." How do you respond to Pryce's request?

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.

The first step in computing an estate's taxable income is the determination of its gross 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 $50,000.Harry's AGI can increase by as much as $40,000.

The Raven Trust was terminated this year and David, the beneficiary of the corpus, received all of the trust assets.The trust had a $10,000 net operating loss; this was the only tax year in which the trust operated a business.The entity has one income beneficiary, Flo.As a result of these transactions:

The Prakash Estate is required to pay its entire annual accounting income to beneficiaries Sam and Janet.The estate's personal exemption is:

The Prakash Trust is required to pay its entire annual accounting income to beneficiaries Sam and Janet.The trust's personal exemption is:

The tax rules regarding the income taxation of trusts and estates are included in which Subchapter of the Internal Revenue Code?

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 Julius Trust made a gift to the United Charity on April 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.

With respect to a timely filed Form 1041 for a trust based in Delaware, the IRS will accept:

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 Raja Trust operates a welding business.Its current-year cost recovery deductions properly amount to $75,000.Raja's accounting income was $100,000, of which $40,000 was distributed to first-tier beneficiary Chuck, $25,000 was distributed to second-tier beneficiary Ruby, and $35,000 was accumulated by the trustee.Ruby also received a $25,000 discretionary corpus distribution.Raja's DNI was $80,000.Identify the treatment of Raja's cost recovery deductions.