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.

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Question 2

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 3

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?

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Question 4

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 5

There are several business tax credits that the Yeoman Trust has generated for this tax year.Which taxpayer(s),if any,can use these credits in computing a Federal income tax liability? Explain.

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Question 6

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?

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Question 7

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 8

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

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Question 9

In computing Federal taxable income,can the trust or estate use its distributable net income (DNI)as its deduction for distributions to beneficiaries? Explain.

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Question 10

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

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Quiz 20: Income Taxation of Trusts and Estates