Question 1

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.

Accepted Answer

The answer of Your client Ming is a complex trust...

Question 2

You are responsible for the Federal income tax filings of the Tyrone Trust. Summarize the relevant due dates and filing requirements for Tyrone.

Accepted Answer

The answer of You are responsible for the Federal income...

Question 3

For each of the following independent statements, choose the best answer.
-​The entity is an information-reporting, not a tax-paying, taxpayer.

Accepted Answer

The answer of For each of the following independent statements,...

Question 4

For each of the following independent statements, choose the best answer.
-The entity must file an income tax return if its gross income for the year is $600 or more.

Accepted Answer

This statement applies to both estates and complex trusts, as both types of entities are subject to income tax and must file a return if their gross income for the year is $600 or more.

Question 5

For each of the following independent statements, choose the best answer.
-Distributable net income is used to account for distributions by the entity to its beneficiaries.

Accepted Answer

Distributable net income (DNI) is a tax concept used to determine the amount of income that must be distributed by an estate or complex trust to its beneficiaries in order to avoid paying income tax at the entity level. Therefore, it is a tax attribute of both estates and complex trusts.

Question 6

The entity's AMT preferences and adjustments pass through to the income beneficiaries.

Accepted Answer

When an estate or trust pays AMT, the AMT preferences and adjustments flow through to the income beneficiaries, and they may be subject to AMT at the individual level. Therefore, the answer is true.

Question 7

For each of the following independent statements, choose the best answer.
-In the year of termination, the entity's net operating loss carryovers are passed through to the beneficiaries.

Accepted Answer

Both estates and complex trusts have the ability to pass through net operating loss carryovers to beneficiaries in their final year of existence.

Question 8

Olsen has been determined to be a grantor trust by the IRS. What are the tax consequences of this tax status? What are the tax return filing requirements for Olsen and for Peggy, the donor of the trust's assets?

Accepted Answer

The answer of Olsen has been determined to be a...

Question 9

For each of the following independent statements, choose the best answer.
-The entity can choose between the cash and accrual methods of reporting its income and deductions.

Accepted Answer

Both estates and complex trusts have the option to choose between cash and accrual methods of reporting their income and deductions.

Question 10

Marcus has been determined to be a grantor trust by the IRS. Your partner explains that this probably happened because the donor of the trust assets retained excessive powers over the operation of the trust or the use of its assets and income. To what powers is your partner referring?

Accepted Answer

The answer of Marcus has been determined to be a...

Question 11

For each of the following independent statements, choose the best answer.
-The entity is controlled by Federal-level probate laws.

Accepted Answer

Federal-level probate laws do not control the tax attributes of estates or complex trusts. Tax matters are governed by tax laws, while probate laws deal with the distribution of a deceased person's estate.

Question 12

For each of the following independent statements, choose the best answer.
-The person who transfers assets to a trust.

Accepted Answer

The person who transfers assets to a trust is known as the Grantor.

Question 13

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.
-The fiduciary in charge of an estate.

Accepted Answer

An executor is the fiduciary in charge of an estate.

Question 14

For each of the following independent statements, choose the best answer.
-For a calendar-year entity, the Form 1041 has an unextended due date of April 15.

Accepted Answer

The Form 1041 is used to report income, deductions, and credits related to estates and trusts. Therefore, the unextended due date of April 15 applies to both estates and complex trusts.

Question 15

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 trust whose income is taxed to the donor, not the beneficiaries.

Accepted Answer

A trust whose income is taxed to the donor, not the beneficiaries is a Grantor trust.

Question 16

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 trust that might be used to reduce probate costs, but not Federal estate and gift tax.

Accepted Answer

The answer of For each of the following items, insert...

Quiz 20: Income Taxation of Trusts and Estates

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.

You are responsible for the Federal income tax filings of the Tyrone Trust. Summarize the relevant due dates and filing requirements for Tyrone.

For each of the following independent statements, choose the best answer. -The entity is an information-reporting, not a tax-paying, taxpayer.

For each of the following independent statements, choose the best answer. -The entity must file an income tax return if its gross income for the year is $600 or more.

For each of the following independent statements, choose the best answer. -Distributable net income is used to account for distributions by the entity to its beneficiaries.

The entity's AMT preferences and adjustments pass through to the income beneficiaries.

For each of the following independent statements, choose the best answer. -In the year of termination, the entity's net operating loss carryovers are passed through to the beneficiaries.

Olsen has been determined to be a grantor trust by the IRS. What are the tax consequences of this tax status? What are the tax return filing requirements for Olsen and for Peggy, the donor of the trust's assets?

For each of the following independent statements, choose the best answer. -The entity can choose between the cash and accrual methods of reporting its income and deductions.

Marcus has been determined to be a grantor trust by the IRS. Your partner explains that this probably happened because the donor of the trust assets retained excessive powers over the operation of the trust or the use of its assets and income. To what powers is your partner referring?

For each of the following independent statements, choose the best answer. -The entity is controlled by Federal-level probate laws.

For each of the following independent statements, choose the best answer. -The person who transfers assets to a trust.

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. -The fiduciary in charge of an estate.

For each of the following independent statements, choose the best answer. -For a calendar-year entity, the Form 1041 has an unextended due date of April 15.

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 trust whose income is taxed to the donor, not the beneficiaries.

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 trust that might be used to reduce probate costs, but not Federal estate and gift tax.

Quiz 20: Income Taxation of Trusts and Estates

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.

You are responsible for the Federal income tax filings of the Tyrone Trust. Summarize the relevant due dates and filing requirements for Tyrone.

For each of the following independent statements, choose the best answer. -​The entity is an information-reporting, not a tax-paying, taxpayer.

For each of the following independent statements, choose the best answer. -The entity must file an income tax return if its gross income for the year is $600 or more.

For each of the following independent statements, choose the best answer. -Distributable net income is used to account for distributions by the entity to its beneficiaries.

The entity's AMT preferences and adjustments pass through to the income beneficiaries.

For each of the following independent statements, choose the best answer. -In the year of termination, the entity's net operating loss carryovers are passed through to the beneficiaries.

Olsen has been determined to be a grantor trust by the IRS. What are the tax consequences of this tax status? What are the tax return filing requirements for Olsen and for Peggy, the donor of the trust's assets?

For each of the following independent statements, choose the best answer. -The entity can choose between the cash and accrual methods of reporting its income and deductions.

Marcus has been determined to be a grantor trust by the IRS. Your partner explains that this probably happened because the donor of the trust assets retained excessive powers over the operation of the trust or the use of its assets and income. To what powers is your partner referring?

For each of the following independent statements, choose the best answer. -The entity is controlled by Federal-level probate laws.

For each of the following independent statements, choose the best answer. -The person who transfers assets to a trust.

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. -The fiduciary in charge of an estate.

For each of the following independent statements, choose the best answer. -For a calendar-year entity, the Form 1041 has an unextended due date of April 15.

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 trust whose income is taxed to the donor, not the beneficiaries.

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 trust that might be used to reduce probate costs, but not Federal estate and gift tax.

For each of the following independent statements, choose the best answer. -The entity is an information-reporting, not a tax-paying, taxpayer.