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Question;2527. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #2;The grantor of a trust generally designates both ____________________ and;beneficiaries under the controlling agreement.;2528. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #3;Under the general rules of Subchapter J, whoever receives the;income of a trust or estate is the one who pays tax on it.;2529. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #4;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.;2530. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #5;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.;2531. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #6;Every ____________________ trust is allowed a $300 personal exemption.;2532. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #7;It is ____________________ (rare, common, impossible) for a trust or estate to;incur a liability for the alternative minimum tax.;2533. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #8;A fiduciary entity computes its alternative minimum tax in a manner similar to;that used for a(n) ____________________.;2534. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #9;The first step in deriving the taxable income of a trust or estate is to;determine its ____________________ income.;2535. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #10;Generally, an estate?s taxable income is computed in a manner similar to that;used for a(n) ____________________.;2536. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #11;Entity accounting income is controlled by the terms of the;for an estate or the ____________________ for a trust.;2537. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #12;By____________________ various items to entity accounting income, the will or;trust determines the size of the distribution to the income beneficiaries.;2538. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #13;The exempt interest income of a trust usually is allocable to;beneficiaries.;2539. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #14;The depreciation deductions of a trust usually are allocable to;beneficiaries.;2540. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #15;When a beneficiary receives a distribution from a trust of an asset other than;cash, generally a(n) ____________________ basis is assigned to the asset.;2541. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #16;When a beneficiary receives a distribution from a trust of an asset other than;cash, the realized loss could be disallowed under the;rule.;2542. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #17;A fiduciary?s ____________________ deductions are assigned corresponding to the;disposition of entity accounting income for the year.;2543. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #18;A gift to charity from its 2011 income is deductible on an estate?s Form 1041;if it is made by the end of the ____________________ tax year.;2544. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #19;The deduction for the Goodman Trust?s $100,000 gift to charity is;when one-fourth of Goodman?s accounting income for the tax;year is exempt interest income.;2545. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #20;is the maximum amount that can be included in the;beneficiaries? gross incomes from the fiduciary for the year.;2546. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #21;A fiduciary assigns its tax credits to beneficiaries corresponding to the;disposition of its ____________________ for the year.;2547. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #22;A ____________________ tier distribution is one that the trust agreement;requires to be made by the trustee to the income beneficiary.;2548. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #23;One trust that is operated independently for each of its three beneficiaries;might be taxed using the ____________________ rule.;2549. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #24;Income beneficiary Molly wants to receive all of the municipal bond interest;income of the Brenner Trust. A ____________________ of this sort must be;supported by a non-tax economic effect.;2550. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #25;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.;2551. CHAPTER 20?INCOME;TAXATION OF TRUSTS AND ESTATES Question CO #26;Income is taxed to the creator of a(n) ____________________ trust, instead of;to the entity.;2552. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #27;The entity is a ___________________ trust if the grantor retains the power to;revoke the trust.;2553. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #28;If the grantor of a trust retains the right to receive borrowed funds from the;trust at a zero interest rate, the entity ____________________ (is, is not);treated as a grantor trust.;2554. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #29;The accounting income of a trust is distributed to the grantor?s ex-spouse, in;satisfaction of the year?s alimony obligation. The ____________________ is;taxed on the amount of the distribution.;2555. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #30;A Form 1041 must be filed by an estate that recognizes $____________________ or;more gross income for the tax year.;2556. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #31;The Form 1041 of a calendar-year trust is due on ____________________ 15.;2557. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #32;The IRS encourages ____________________ filing for Forms 1041.;2558. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question CO #33;Beneficiary information concerning a trust?s income and distributions are;conveyed on Schedule ____________________ of the Form 1041.;2559. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question PR #1;The Purple Trust incurred the following items this year.;Taxable;interest income;$50,000;Tax-exempt;interest income, not on private activity bonds;20,000;Tax-exempt;interest income, on private activity bonds;10,000;Compute Purple?s tentative minimum tax for the year. Purple does not have any;credits available to reduce the AMT liability.;2560. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question PR #2;The Booker Trust is your client. Complete the chart below, indicating Booker?s;trust accounting income for each of the alternatives.;Interest;income, taxable;$60,000;Interest;income, tax-exempt;30,000;Interest;income, tax-exempt but AMT preference;10,000;Long-term;capital gain;15,000;Trustee fee;3,000;Trust agreement provisions;Trust accounting income;Fees and;capital gains allocable to corpus;Capital;gains allocable to corpus, one-half of fees allocable to income;Capital;gains allocable to income, silent concerning allocation of fees;Fees and;exempt income allocable to corpus, silent concerning allocation of capital;gain/loss;2561. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question PR #3;Bob is one of the income beneficiaries of the LaQuanda Estate, which is subject;to a 45% marginal Federal estate tax rate, a 35% marginal Federal income tax;rate, and a 5% marginal state income tax rate. This year, Bob received all of;the sales commissions that were earned and payable to Lulu LaQuanda (cash;basis) at her death. Compute Bob?s ? 691(c) deduction for the current year;given the following data.;Sales;commissions receivable;$50,000;Deferred;gain on installment sale, three payments to be received after this year;10,000;2562. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question PR #4;The Raja Trust operates a welding business. Its current-year cost recovery;deductions properly amount to $75,000. Raja?s accounting income was $100,000;of which $40,000 was distributed to first-tier beneficiary Chuck, $25,000 was;distributed to second-tier beneficiary Ruby, and $35,000 was accumulated by the;trustee. Ruby also received a $25,000 discretionary corpus distribution. Raja?s;DNI was $80,000. Identify the treatment of Raja?s cost recovery deductions.;2563. CHAPTER;20?INCOME TAXATION OF TRUSTS AND ESTATES Question PR #5;The LMN Trust is a simple trust that correctly uses the calendar year for tax;purposes. Its income beneficiaries (Kathie, Lynn, Mark, and Norelle) are;entitled to the trust?s annual accounting income in shares of one-fourth each.;For the current calendar year, the trust has ordinary business income of;$30,000, a long-term capital gain of $20,000 (allocable to corpus), and a;trustee commission expense of $4,000 (allocable to corpus). Use the format of;Figure 20.3 in the text to address the following items..;a.;How much;income is each beneficiary entitled to receive?;b.;What is the;trust?s DNI?;c.;What is the;trust?s taxable income?;d.;How much is;taxed to each of the beneficiaries?;Item;Totals;Accounting;Income;Taxable Income;Distributable;Net;Income/;Distribution;Deduction;Ordinary income;$30,000;$30,000;$30,000;Net long-term capital gain;20,000;20,000;Fiduciary fees;4,000;(4,000);Personal exemption;(300);Accounting Income/Taxable Income Before the;Distributions Deduction;$30,000STEP 1;$45,700STEP 2;$45,700;Exemption;300;Corpus Capital Gain/Loss;(20,000);Net Exempt Income;Distributable Net Income;$26,000;Distribution Deduction;(26,000)STEP 3;Entity Taxable Income;$19,700STEP 4

 

Paper#59269 | Written in 18-Jul-2015

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