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Question;2480. Question MC #1;The tax rules regarding the income taxation of trusts and estates are included;in which Subchapter of the Internal Revenue Code?;a.;S.;b. K.;c. J.;d. C.;2481. Question MC #2;Which of the following is a typical duty of an executor?;a.;Pay funeral expenses.;b. Pay off the decedent?s financial;liabilities.;c. Distribute the net assets of the;probate estate.;d. Manage the decedent?s assets until;they are liquidated or distributed.;e. All of the above;2482. Question MC #3;Which of the following is a typical duty of a trustee?;a.;Make decisions as to how to invest the trust corpus portfolio.;b. Modify the language of the trust;instrument so as to lower the entity?s Federal income tax.;c. Pay the estate taxes of the grantor.;d. Allocate items between income and;corpus using Subchapter J rules.;e. All of the above.;2483. Question MC #4;Which of the following is a typical duty of a trustee?;a.;File the entity?s returns for the local property tax on real estate.;b. File the entity?s state and Federal;income tax returns.;c. Invest the assets that comprise the;corpus of the entity.;d. Distribute entity accounting income;to the beneficiaries in accordance with the provisions of the trust instrument.;e. All of the above.;2484. Question MC #5;The Code defines a ?simple trust? as which of the following?;a.;One which is allowed to file Form 1041-EZ.;b. One which has only one income;beneficiary.;c. One which must distribute its;accounting income every year.;d. One whose grantor was a living;individual.;2485. Question MC #6;Which of the following taxpayers can be subject to an entity-level Federal;income tax?;a.;Complex trust.;b. Partnership.;c. Limited liability company.;d. All of the above taxpayers are;passthrough entities, and they never are subject to an entity-level Federal;income tax.;2486. Question MC #7;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?;a.;Complex trust.;b. Partnership.;c. S corporation.;d. All of the above taxpayers use;Schedule K and K-1.;2487. Question MC #8;The Chen Trust is required to distribute its accounting income every year;one-half to Missy Chen, and one-half to the local church?s homeless shelter.;What is the Chen Trust?s personal exemption?;a.;$600.;b. $300.;c. $100.;d. $0.;2488. Question MC #9;The Jain Estate is required to pay its entire annual accounting income to Sam;and Janet. The estate?s personal exemption is;a.;$0.;b. $100.;c. $300.;d. $600.;2489. Question MC #10;The Jain Trust is required to pay its entire annual accounting income to Sam;and Janet. The trust?s personal exemption is;a.;$600.;b. $300.;c. $100.;d. $0.;2490. Question MC #11;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;a.;$0.;b. $100.;c. $300.;d. $600.;2491. Question MC #12;The Rodriguez Trust generated $100,000 in alternative minimum taxable income;(AMTI) this year. The trust is subject to a marginal Federal income tax rate;of;a.;26%.;b. 28%.;c. 35%.;d. 39.6%.;2492. Question MC #13;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.;Assuming that the trustee made an election under ? 643(e), the trust is allowed;a $10,000 distribution deduction for this transaction.;b. Assuming that the trustee made an;election under ? 643(e), Telly recognizes $10,000 gross income on the;distribution.;c. Lacking any election by the trustee;the trust recognizes $15,000 gross income on the distribution.;d. Lacking any election by the trustee;Telly?s basis in the asset is $10,000.;e. Lacking any election by the trustee;Telly?s basis in the asset is stepped up to $25,000.;2493. Question MC #14;Three months after Emma Timkin died, her executor received the final $10,000;installment of Emma?s Super Lottery winnings from the state. Which of the;following statements is true?;a.;The $10,000 is subject to neither income nor estate tax, because it was received;after Emma?s death.;b. The $10,000 is both included in;Emma?s gross estate, and subject to tax on her estate?s income tax return.;c. The $10,000 is subject to tax only on;her estate?s income tax return.;d. The $10,000 is included only in;Emma?s gross estate.;2494. Question MC #15;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?;a.;$0.;b. $8,000.;c. $12,000.;d. $20,000.;2495. Question MC #16;Three weeks after Tina died, her brother Tony properly received Tina?s last;paycheck from her employer. The gross amount of the check was $4,000, and a;$700 deduction for state income taxes was subtracted in computing the net;amount of the payment. Which of the following statements is true?;a.;The $700 is deductible both on Tony?s income tax return and on Tina?s estate;tax return.;b. The $700 is deductible on neither;Tony?s income tax return nor on Tina?s estate tax return.;c. The $700 is deductible only in;computing Tina?s taxable estate.;d. The $700 is deductible only on the;income tax return of Tina?s estate.;2496. Question MC #17;The Zhang Trust incurred the following items during the year.;Taxable interest received;$40,000;Tax-exempt interest received;60,000;Tax preparation fees paid;10,000;What is Zhang?s deduction for the tax preparation fees?;a.;$0.;b. $4,000.;c. $6,000.;d. $10,000.;2497. Question MC #18;Which, if any, of the following statements relates to the tax treatment of both estates and trusts?;a.;The entity is required to distribute all of its income currently to its;beneficiaries.;b. The entity must use the same tax year;as its creator (i.e., grantor, decedent).;c. In the year of its termination, the;entity?s net operating loss carryovers are passed through to its beneficiaries.;d. The termination date of the entity is;specified in the controlling document.;2498. Question MC #19;The distributable net income (DNI) of a fiduciary taxpayer;a.;Constitutes the maximum amount for the fiduciary?s distribution deduction.;b. Specifies the character of the;distributions in the hands of the year?s income beneficiaries.;c. Marks the maximum amount of gross;income that income beneficiaries must report when receiving distributions.;d. All of the above.;2499. Question MC #20;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?;a.;Distributable net income.;b. Entity taxable income.;c. Adjusted gross income.;d. Fiduciary accounting income.;2500. Question MC #21;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;a.;$50,000.;b. $40,000.;c. $30,000.;d. $0. Because the distributions of a;complex trust are discretionary, no deduction is allowed.;2501. Question MC #22;This year, the Nano Trust reported $50,000 entity accounting income and $40,000;distributable net income (DNI). Nano distributed $60,000 cash to Horatio, its;sole income beneficiary. Nano is a simple trust. Nano?s distribution deduction;is;a.;$60,000.;b. $50,000.;c. $40,000.;d. $0.;2502. Question MC #23;This year, the Huang Trust distributed all of its accounting income and $1,000;from corpus. Huang?s taxable income for the year is;a.;$0.;b. ($100).;c. ($300).;d. ($1,000).;2503. Question MC #24;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 payment of;these amounts, the trustee is empowered to make additional distributions at its;discretion. Exercising this authority, the trustee distributes an additional;$40,000 to Roger and $40,000 to Sally. How much income from the trust must;Sally recognize?;a.;$90,000.;b. $60,000.;c. $50,000.;d. $40,000.;2504. Question MC #25;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 Sally recognize?;a.;$80,000.;b. $60,000.;c. $50,000.;d. $20,000.;2505. Question MC #26;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.;2506. Question MC #27;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.;$80,000.;b. $60,000.;c. $50,000.;d. $20,000.;2507. Question MC #28;The Ulrich Trust has distributable net income (DNI) 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 $15,000 to Roger and $15,000 to Sally. How much gross income from;the trust must Roger recognize?;a.;$15,000.;b. $50,000.;c. $60,000.;d. $75,000.;2508. Question MC #29;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?;a.;$20,000 by Marilyn and $40,000 by Domingo.;b. $15,000 by Marilyn and $15,000 by;Domingo.;c. $13,500 by Marilyn and $13,500 by;Domingo.;d. $9,000 by Marilyn and $18,000 by;Domingo.;2509. Question MC #30;The Bedford 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 is required to distribute $30,000 to Roger and $60,000 to Sally. After;payment of these amounts, the trustee is empowered to make additional;distributions at its discretion. Exercising this authority, the Bedford trustee;distributes an additional $40,000 to Roger, and $40,000 to Sally. How much;income from the trust must Sally recognize?;a.;$70,000.;b. $65,000.;c. $60,000.;d. $30,000.;2510. Question MC #31;The Edgerton Estate generated distributable net income (DNI) this year of;$100,000, one-fourth of which was tax-exempt interest, and the balance of which;was long-term capital gain. Kyle Edgerton, the sole income beneficiary of the;Estate, received a distribution of the entire $125,000 accounting income of the;entity. How does Kyle report the distribution?;a.;$100,000 ordinary income.;b. $125,000 ordinary income.;c. $50,000 long-term capital gain;$50,000 exempt interest.;d. $75,000 long-term capital gain;$25,000 exempt interest.;2511. Question MC #32;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?;a.;$90,000.;b. $78,000.;c. $48,000.;d. $30,000.;2512. Question MC #33;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 Clark?;a.;$0, only first-tier distributions are subject to Federal income tax.;b. $72,000.;c. $75,000.;d. $90,000.;2513. Question MC #34;To reduce trustee commissions, the Sigrid Trust is operated as though it were;two trusts (i.e., with 70-year-old Grandma and 7-year old Skippy each holding;equal shares). This year the trust generated distributable net income (DNI) of;$80,000. The Sigrid trustee distributed $100,000 to Grandma this year: $40,000;as her one-half share of the entity?s income, and $60,000 as a distribution of;principal. Skippy received no distribution. How much of the year?s;distributable net income is assigned to Grandma?;a.;$40,000.;b. $50,000.;c. $80,000.;d. $100,000.;2514. Question MC #35;The Williamson Estate generated distributable net income (DNI) this year of;$120,000, one-third of which was tax-exempt interest, and the balance of which;was long-term capital gain. Muffy Williamson, the sole income beneficiary of;the estate, received a distribution of the entire $150,000 accounting income of;the entity. How is this distribution accounted for by Muffy?;a.;$150,000 ordinary income.;b. $120,000 ordinary income.;c. $80,000 long-term capital gain;$40,000 exempt interest.;d. $100,000 long-term capital gain;$50,000 exempt interest.;2515. Question MC #36;The Exeter Trust instrument provides that Tamara, the sole income beneficiary;is to receive $30,000 annually. If trust accounting income is not sufficient to;pay this amount, the Exeter trustee is empowered to invade corpus to the extent;necessary. During the current year, the trust has distributable net income;(DNI) of $100,000, including $20,000 of tax-exempt interest. In accordance with;the trust instrument, $30,000 is paid to Tamara. What is Tamara?s gross income;from Exeter for the current year?;a.;$100,000.;b. $30,000.;c. $24,000.;d. $10,000.;2516. Question MC #37;Which of the following restrictions applies concerning distributions to trust;beneficiaries?;a.;Special allocations are not allowed under Subchapter J.;b. Special allocations are allowed, but;only in the trust?s termination year.;c. Special allocations are allowed, but;only for portfolio income items.;d. Special allocations of income types;are allowed, assuming that they carry substantial economic effect.;2517. Question MC #38;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;a.;Flo claims the $10,000 NOL on her Form 1040.;b. David claims the $10,000 NOL on his;Form 1040.;c. Flo and David each report a $5,000;NOL on their Forms 1040.;d. The $10,000 NOL is lost forever.;2518. Question MC #39;The Code defines a grantor trust as which of the following?;a.;One which is required to file Form 1041-G.;b. One in which a member of the;grantor?s family is the sole trustee.;c. One which the grantor can revoke or;otherwise amend.;d. One which makes annual payments to;designated charities.;2519. Question MC #40;The Yellow Trust incurred $10,000 of portfolio income. Its corporate trustee;paid fiduciary fees of $1,000 therefrom, and also paid $1,000 in premiums for a;life insurance policy on Marcia, the grantor of the trust. How much gross;income does Marcia include with respect to these trust activities?;a.;$10,000.;b. $9,000.;c. $1,000.;d. $800.;2520. Question MC #41;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?;a.;$0.;b. $4,000.;c. $9,000.;d. $10,000.;2521. Question MC #42;With respect to a timely filed Form 1041 for a trust based in Delaware, the IRS;will accept;a.;Only paper returns.;b. Only e-filed returns.;c. Returns either on paper or in;electronic form.;d. Returns only at its Ogden, Utah;office.;2522. Question MC #43;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;a.;A first-tier beneficiary.;b. A second-tier beneficiary.;c. Only a remainder beneficiary.;d. Both a first- and a second-tier;beneficiary.;2523. Question MC #44;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?;a.;Distribute the land to Eddie and make a ? 643(e) election.;b. Distribute the land to Eddie and make;no ? 643(e) election.;c. Sell the land to a third party.;d. Neither sell nor distribute the land

 

Paper#59268 | Written in 18-Jul-2015

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