Question 1

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?

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Question 2

The DaSinzi Estate has two equal income beneficiaries (Rollo and Luisa) and one remainder beneficiary (Coco).The estate operates a business and generates cost recovery deductions.Which taxpayer(s),if any,can deduct these items, e.g. ,the deceased,the estate,Rollo,Luisa,or Coco?

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Question 3

List and discuss the three major functions of distributable net income (DNI) as that amount is used under Federal income tax law.

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Question 4

The Gibson Estate is responsible for collecting outstanding income amounts and paying the remaining obligations of Juanita Gibson,the deceased.How does Federal income tax law treat these items? Hint: Define and use the term income in respect of a decedent in your answer.

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Question 5

The Yeoman Trust has generated several Federal income tax credits for this tax year.Which taxpayer(s),if any,can use these credits in computing a Federal income tax liability,e.g. ,the grantor,the trust,its income beneficiaries,its remainder beneficiaries? Answer for estates,simple trusts,and complex trusts.

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Question 6

The trustee of the Miguel Trust can distribute any amount of accounting income and corpus to the trust's income beneficiaries,Paula and George.This year,the trust incurred the following. Taxable interest income $40,000 Tax-exempt interest income 20,000 Long-term capital gains-allocable to corpus 10,000 Fiduciary's fees-allocable to corpus 6,000 The trustee distributed $40,000 to Paula and $40,000 to George.
a.What is Miguel's trust accounting income?
b.What is Miguel's DNI?
c.What is Miguel's taxable income?
d.How much gross income is recognized by each of the beneficiaries?

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Question 7

Consider the term distributable net income as it is used with respect to the Federal income taxation of trusts and estates.How is this amount computed? Where is it used in computing the parties' taxable incomes?

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Question 8

Summarize the Federal income tax rules that apply to a trust or estate concerning the alternative minimum tax.Include comments about the applicable tax rates,and any personal exemption.

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Question 9

The Gomez Trust is required to distribute $80,000 annually,split equally between its two income beneficiaries,Lara and Byron.If trust income is not sufficient to pay these amounts,the trustee can invade corpus to the extent necessary.During the current year,the trust has DNI of $60,000.Byron receives an additional $30,000 discretionary corpus distribution.
a.How much of the $40,000 distributed to Lara is included in her gross income?
b.How much of the $70,000 distributed to Byron is included in his gross income?
c.How much of these distributions are first-tier distributions or second-tier distributions?

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Question 10

The Yan Estate is your client,as are many of the decedent's family members.Determine the tax effects of the indicated losses for the Yan Estate for both tax years.The estate holds a variety of investment assets,which it received from the decedent,Mrs.Yan.The estate's sole income and remainder beneficiary is Yan,Jr. Tax Year Loss Generated 2015 (first tax year) Taxable income ($300) Capital loss ($20,000) 2016 (final tax year) Taxable income ($40,000)

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Question 11

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?

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Question 12

Does the estate or trust's distributable net income always equal its deduction for distributions to beneficiaries? Are the two amounts ever equal in amount? Answer for estates,simple trusts,and complex trusts.

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Question 13

The Federal income taxation of a trust or estate has been described as a "modified pass-through" system.Compare fiduciary tax rules to those that apply to LLCs and to individuals.

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Question 14

When the Holloway Trust terminated this year,it held a $1 million NOL carryforward.How is the loss carryforward treated? Does it expire with the trust or can another taxpayer use it? Be specific.

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Question 15

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.

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Question 16

Identify the parties that are present when an estate is created,and their key duties.Then do the same for a trust.

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Question 17

Consider the term fiduciary accounting income as it is used with respect to the Federal income taxation of trusts and estates.How is this amount computed? Where is it used in computing the parties' taxable incomes?

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Question 18

The Circle Trust reports some exempt interest income for the year.How does this investment income affect Circle's deduction of its fiduciary fees? Charitable contributions?

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Question 19

The Moot Trust distributes an asset to its income beneficiary that shows a realized gain.What are the Federal income tax consequences of the distribution? What if the asset shows a realized loss?

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Question 20

The Willa estate reports $100,000 DNI,composed of $50,000 dividends,$20,000 taxable interest,$10,000 passive income,and $20,000 tax-exempt interest.Willa's two noncharitable income beneficiaries,Shanna and Tom,receive distributions of $75,000 each.How much of each class of income is deemed to have been distributed to Shanna? To Tom? Use the following template to structure your answer. ​ ​ Beneficiary Amount Received DNI,Income Type Corpus, Non-taxable Dividends Taxable Interest Passive Exempt Interest Shanna ​ ​ ​ ​ ​ ​ Tom ​ ​ ​ ​ ​ ​ Totals in DNI ​ ​ ​ ​ ​ ​

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Quiz 28: Income Taxation of Trusts and Estates