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Exam 28: Income Taxation of Trusts and Estates

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Question 71

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

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-DNI determines the maximum amount that ...

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Question 72

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A living trust is a revocable entity that is used to avoid proceedings upon the death of the grantor.

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Question 73

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Which of the following taxpayers use a Schedule K and K-1 to pass through income, loss, and credit amounts to the owners or beneficiaries?

For each of the following independent statements, choose the best answer. -The entity has a legal identity separate from its beneficiaries.

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

Beginning with its tax year, an estate must remit quarterly Federal estimated income tax payments.

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

For each of the following independent statements, choose the best answer. -The entity typically can choose any fiscal tax year.

For each of the following independent statements, choose the best answer. -The entity's AMT preferences and adjustments pass through to the income beneficiaries.

Which of the following is a typical duty of an executor of an estate?

When a beneficiary receives a distribution from a trust of an asset other than cash, generally a(n) ____________________ basis is assigned to the asset.

Entity accounting income is controlled by the terms of the for an estate or the ____________________ for a trust.

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

The Taft Estate was established when Winnie Taft died on March 1, 2014. It selects a fiscal Federal income tax year that ends on October 31. For which tax year ending October 31 must Taft begin to make quarterly estimated Federal income tax payments?

The Willis Trust instrument provides that Tamara, the sole income beneficiary, is to receive $40,000 annually. If trust accounting income is not sufficient to pay this amount, the Willis trustee is empowered to invade corpus to the extent necessary. During the current year, the trust reports distributable net income (DNI) of $100,000, including $30,000 of net tax-exempt interest. In accordance with the trust instrument, $40,000 is paid to Tamara. What is Tamara's gross income from the Willis Trust for the current year?

The Willa estate reports $100,000 DNI, composed of $50,000 dividends, $20,000 taxable interest, $10,000 passive income, and $20,000 tax­exempt interest. Willa's two noncharitable income beneficiaries, Shanna and Tom, receive distributions of $75,000 each. How much of each class of income is deemed to have been distributed to Shanna? To Tom? Use the following template to structure your answer.

A gift to charity from its 2015 income is deductible on an estate's Form 1041 if it is made by the end of the ____________________ (2015, 2016) tax year.

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

For each of the following independent statements, choose the best answer. -The entity's management generally is directed by the controlling document as to the date of the entity's termination.