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Exam 28: Income Taxation of Trusts and Estates

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Question 71

Multiple Choice

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The Zhang Trust incurred the following items during the year. What is Zhang's deduction for the tax preparation fees?

A) $0.
B) $4,000.
C) $6,000.
D) $10,000.

E) None of the above
F) A) and B)

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Question 72

Multiple Choice

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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 paying these amounts,the trustee is empowered to make additional distributions at its discretion.Exercising this authority,the trustee distributes an additional $10,000 to Roger and $30,000 to Sally.How much gross income from the trust must Roger recognize?

A) $60,000.
B) $50,000.
C) $40,000.
D) $30,000.

E) C) and D)
F) All of the above

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Question 73

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It is ____________________ (rare,common,impossible)for a trust or estate to incur a liability for the alternative minimum tax.

The first step in deriving the taxable income of a trust or estate is to determine its ____________________ income.

In computing Federal taxable income,can the trust or estate use its distributable net income (DNI)as its deduction for distributions to beneficiaries? Explain.

There are several business tax credits that the Yeoman Trust has generated for this tax year.Which taxpayer(s),if any,can use these credits in computing a Federal income tax liability? Explain.

Beneficiary Terry received $30,000 from the Urgent Trust.Trust accounting income for the year was $50,000.The trust generated $20,000 in cost recovery deductions.How much can Terry deduct with respect to the cost recovery deductions that Urgent generated?

The Whitmer Trust operates a manufacturing business.When Whitmer incurs a net operating loss,the current-year deduction passes through to the income beneficiaries.

Remainder beneficiary Shelley receives a $50,000 net operating loss carryover when the Malone Trust terminates.Shelley deducts this amount ____________________ (for/from)AGI on her Form 1040.

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

Under the Federal income tax rules for fiduciary entities,a(n)____________________ generally must use a calendar tax year,but a(n)____________________can select any tax year-end.

A fiduciary entity computes its alternative minimum tax in a manner similar to that used for a(n)____________________.

The trustee of the Epsilon Trust distributed an asset to Telly,a qualifying income beneficiary.The asset's basis to the trust was $10,000,and its fair market value on the distribution date was $25,000.Which of the following statements is true?

A fiduciary arrangement creates a separate tax and legal entity,but Subchapter J applies a modified ____________________ principle in deriving the Federal income tax liability for estates,trusts,and their beneficiaries. or

Your client Ming is a complex trust that operates exclusively in the U.S.Make a list of five or more tax planning opportunities that you might suggest to Ming.

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?

The Jain Trust is required to pay its entire annual accounting income to the Daytona Museum,a qualifying charity.The trust's personal exemption is:

Generally,capital gains are allocated to fiduciary income,because they relate to investment assets.

Jose is subject to the top marginal Federal income tax rates.Carlita is considering establishing a trust in which Jose would be an income beneficiary.Considering only income tax consequences,Jose should be designated as:

The Booker Trust is your client.Complete the chart below,indicating Booker's trust accounting income for each of the alternatives.