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Exam 28: Income Taxation of Trusts and Estates

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Question 41

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If provided for in the controlling agreement,a trust might terminate when the income beneficiary reaches age 35.

A) True
B) False

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Question 42

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The Gable Trust reports $20,000 business income and $10,000 exempt interest income,and it paid a $3,000 fiduciary fee.Gable's distributable net income (DNI) includes $9,000 for the interest income.

A) True
B) False

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Question 43

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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 that can accumulate,rather than distribute,its accounting income.

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

Generally,capital gains are allocated to fiduciary income,because they arise from current-year transactions as directed by the trustee.

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?

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?

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

Trusts can select any Federal income tax year-end.

This year,the Nano Trust reported $50,000 entity accounting income and $40,000 distributable net income (DNI) .Nano distributed $30,000 cash to Horatio,its sole income beneficiary.Nano is a complex trust.Nano's distribution deduction is:

The Yellow Trust incurred $10,000 of portfolio income.Its corporate trustee paid fiduciary fees of $1,000 therefrom.Yellow's accounting income is distributed as follows. ∙ $5,000 to income beneficiary Larry ∙ $4,000 to pay part of the high school tuition bills for Carrie,the daughter of Yellow's grantor Marcia How much gross income does Marcia include with respect to these trust activities?

The grantor of a trust generally designates both ____________________ and ____________________ beneficiaries under the controlling agreement.

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

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?

A trust holds assets that will generate net investment income (NII) and trigger the additional Medicare taxes.The trustee should:

The Doyle 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 $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 $25,000 to Roger and $25,000 to Sally.How much income from the trust must Sally recognize?

The Jiang Trust manages investment assets that were contributed by Kong several years ago.The trust distributed one-half of its DNI this year to Kong.Kong can retain all of the trust's tax-exempt interest income if:

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

Which of the following is the annual maximum amount to be included as gross income by all of the income beneficiaries of the trust or estate?