Deck 17: Trusts

Question 1

Which of the following applies to a testamentary trust that is designated as a graduated rate estate (GRE)?

A) Tax instalments are required.
B) A non-calendar year may be used for tax purposes.
C) The highest rate of tax will apply to all income.
D) The GRE will become a normal testamentary trust after 48 months.

Answer 1

B

Question 2

Which of the following accurately describes one of the rules pertaining to inter vivos trusts?

A) Inter vivos trusts may use the graduated tax rate scale.
B) Inter vivos trusts are allowed the $40,000 exemption in the alternative minimum tax calculation.
C) Inter vivos trusts can deduct personal tax credits.
D) Inter vivos trusts are required to remit quarterly tax instalments.

Answer 2

D

Question 3

Which of the following statements is false with regard to spousal trusts?

A) Property is deemed to have been sold at its cost amount when transferred to the trust.
B) The trust property is deemed to be sold at market value upon the death of the beneficiary (the spouse).
C) Both the spouse and any adult children may receive the capital of the trust prior to the spouse's death.
D) The 21-year rule is waived for the trust's first 21-year anniversary.

Answer 3

C

Question 4

Jasmine is the beneficiary of an inter vivos trust. During 20x4 the trust received the following income:
Capital gains: $16,000
Interest: $10,000
Non-eligible dividends: $8,000
One half of the trust's income from 20x4 was paid to Jasmine, who does not currently have any other sources of income. The remainder of the income remained in the trust.
Required:
a) Determine Jasmine's personal federal tax.
b) Calculate the federal tax for the trust.
(Round all amounts to zero decimal places. Apply rates for 2019.)

Question 5

Which of the following statements is TRUE regarding trusts?

A) Losses that exceed income in a trust are allocated to the beneficiary at the end of the year.
B) The allocation of income from a trust is discretionary.
C) Income that is payable to a beneficiary cannot be deducted from the trust's income.
D) The residence of a trust is determined by the residence of the trustees.

Question 6

A non-spousal trust account holds two buildings as its assets. Building 1 originally cost $150,000 and Building 2 originally cost $210,000. It is now the 21^st anniversary of the trust, and the assets have not been transferred to the beneficiary. The undepreciated capital cost of Building 1 is $85,000 and its market value is $200,000. The undepreciated capital cost of Building 2 is $145,000 and its market value is $190,000. Which costs will be the deemed acquisition values of the buildings for the trust?

A) B1 = $150,000; B2 = $210,000
B) B1 = $85,000; B2 = $145,000
C) B1 = $200,000; B2 = $190,000
D) B1 = $200,000; B2 = $210,000