Question 1

The Leonardo Estate operates a business and generates cost recovery deductions.Which taxpayer(s),if any,can deduct these items,e.g. ,the deceased,the estate,the income or remainder beneficiaries?

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Question 2

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 3

The Purple Trust incurred the following items this year.
  Compute Purple's tentative minimum tax for the year.Purple does not have any credits available to reduce the AMT liability.

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Question 4

Counsell 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 $40,000,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.

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Question 5

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.

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Question 6

The Gibson Estate is responsible for the income in respect of a decedent (IRD)of Juanita Gibson,the deceased.Define the term IRD and describe its treatment for Federal tax purposes

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Question 7

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

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Question 8

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.

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Question 9

Explain how the Federal income tax law applies to a fiduciary entity like a trust.Is the tax structure similar to that of an individual? A partnership?

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Question 10

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.

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Question 11

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.
 
 The trustee distributed $40,000 to Paula and $40,000 to George.

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Question 12

The Circle Trust has 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 13

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 14

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.

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Question 15

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.

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Question 16

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 17

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 18

Counsell 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 $40,000,a long-term capital gain of $20,000 (allocable to income),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.

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Question 19

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 20

Is a trust subject to the alternative minimum tax? Or does the trust "pass through" AMT items to its grantor and beneficiaries?

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Quiz 20: Income Taxation of Trusts and Estates