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Exam 28: Income Taxation of Trusts and Estates

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Question 31

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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.

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Question 32

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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 $20,000 to Roger and $20,000 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 $25,000 to Roger and $50,000 to Sally.How much gross income from the trust must Sally recognize?

A) $70,000.
B) $60,000.
C) $40,000.
D) $20,000.

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

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Question 33

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During the current year, the Santo Trust received $30,000 of taxable interest income, paid trustee's commissions of $3,000, and had no other income or expenses.The Santo trust instrument requires that $20,000 be paid annually to Marilyn, and $40,000 be paid annually to Domingo.How much gross income must Marilyn and Domingo recognize?

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

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

The Rodriguez Trust generated $300,000 in alternative minimum taxable income (AMTI) this year.The trust is subject to a marginal Federal income tax rate of:

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

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

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

The Drabb Trust owns a plot of business-related land, basis of $50,000, fair market value of $35,000.Drabb is subject to a 35% marginal income tax rate.Its sole beneficiary, Eddie, is subject to a 15% marginal income tax rate.Drabb's current-year distributable net income is $95,000.What is the most preferable action for the trustee of Drabb to take, considering only the related tax consequences?

List at least three non-tax reasons that you might suggest to your client Connie that she should consider shifting some income and assets to a trust.

When a trust distributes an in-kind asset with a realized loss, most likely this loss should be allocated to and immediately deducted by the first-tier beneficiaries.

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

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 Ulrich 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 $60,000 to Roger and $60,000 to Sally.After paying these amounts, the trustee is empowered to make additional distributions at its discretion.Exercising this authority, the Ulrich trustee distributes an additional $20,000 to Roger and $20,000 to Sally.How much gross income from the trust must Sally recognize?

A single trust that is operated independently for each of its three beneficiaries might be taxed using the ____________________ rule.

With respect to a trust, the terms creator, donor, and grantor are synonyms.

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:

Generally, an administrative expense should be claimed on the decedent's estate tax return, because it is subject to a higher marginal tax bracket than is the estate's taxable income.

Every ____________________ trust is allowed a $300 personal exemption.