Question 1

The Rodriguez Trust generated $300,000 in alternative minimum taxable income (AMTI) this year. The trust is subject to a marginal Federal income tax rate of:

Accepted Answer

The answer of The Rodriguez Trust generated $300,000 in alternative...

Question 2

Tax planning usually dictates that high-income and high-wealth individuals be specified as second-tier beneficiaries of a trust arrangement.

Accepted Answer

This is true as it allows for tax-efficient distribution of assets and minimizes the estate tax burden.

Question 3

Income beneficiary Turk received $30,000 from the Urgent Trust. Trust accounting income for the year was $100,000. The trust generated $20,000 in cost recovery deductions. How much can Turk deduct with respect to the cost recovery deductions that Urgent generated?

Accepted Answer

Turk can only deduct up to the amount of income he received from the trust, which is $30,000. Therefore, the maximum amount Turk can deduct with respect to the cost recovery deductions is $6,000 ($20,000 x $30,000/$100,000).

Question 4

The Prakash Trust is required to pay its entire annual accounting income to beneficiaries Sam and Janet. The trust's personal exemption is:

Accepted Answer

The answer of The Prakash Trust is required to pay...

Question 5

The Chen Trust is required to distribute its accounting income every year, one-half to Missy Chen, and one-half to
The local church's homeless shelter. What is the Chen Trust's personal exemption?

Accepted Answer

The Chen Trust is a simple trust because it is required to distribute all its income annually. Simple trusts are allowed a personal exemption of $300.

Question 6

The Philmore Estate is subject to a 40% Federal estate tax rate and a 45% Federal and state income tax rate.
Generally, an administrative expense should be claimed on the estate's income tax return.

Accepted Answer

It is generally advised to claim all allowable administrative expenses on the estate's income tax return to reduce the income tax liability. However, estate tax is not reduced by administrative expenses.

Question 7

The unextended due date for a calendar-year trust to file its Form 1041 is March 15.

Accepted Answer

The unextended due date for a calendar year trust to file its Form 1041 is April 15.

Question 8

Generally, an administrative expense attributable to municipal bond interest should be claimed on the estate's Form 706.

Accepted Answer

Administrative expenses directly related to the administration of the estate, such as expenses related to the payment of municipal bond interest, can be claimed as a deduction on the estate's Form 706.

Question 9

Which of the following is a typical duty of an executor of an estate?

Accepted Answer

All of the above duties are typical responsibilities of an executor of an estate. The executor is responsible for managing the assets of the decedent until they are distributed to the beneficiaries. This includes paying off any outstanding debts or liabilities and distributing the remaining assets according to the terms of the will or state law. The executor is also responsible for paying funeral expenses and completing any necessary paperwork or filings related to the probate process.

Question 10

Which of the following taxpayers use a Schedule K and K-1 to pass through income, loss, and credit amounts to the owners or beneficiaries?

Accepted Answer

All of the above taxpayers use Schedules K and K-1 to pass through income, loss, and credit amounts to the owners or beneficiaries.

Question 11

The Prakash Trust is required to pay its entire annual accounting income to the Daytona Museum, a qualifying charity. The trust's personal exemption is:

Accepted Answer

The answer of The Prakash Trust is required to pay...

Question 12

Three months after Brianna Timkin died, her executor received the final $40,000 installment from a sale of land that Brianna completed several years ago. Which of the following statements is true?

Accepted Answer

The $40,000 is included in Brianna's gross estate because it was received within three months of her death. It is also subject to tax on her estate's income tax return because the estate received the income.

Question 13

Which of the following is a typical duty of a trustee?

Accepted Answer

All of the above are typical duties of a trustee. A trustee has a fiduciary duty to manage and administer the trust assets for the benefit of the beneficiaries in accordance with the terms of the trust instrument. This includes filing tax returns, investing assets, and distributing income to beneficiaries.

Question 14

The Prakash Estate has equal income beneficiaries Sam and Janet. As allowed by the terms of the will, the estate makes no income distributions during the current tax year. The estate's personal exemption is:

Accepted Answer

The answer of The Prakash Estate has equal income beneficiaries...

Question 15

The tax rules regarding the income taxation of trusts and estates are included in which Subchapter of the Internal Revenue Code?

Accepted Answer

Subchapter J of the Internal Revenue Code deals with the taxation of trusts and estates, outlining how these entities are taxed on income.

Question 16

The Code defines a "simple trust" as which of the following?

Accepted Answer

The answer of The Code defines a "simple trust" as...

Question 17

Which of the following taxpayers can be subject to an entity-level Federal income tax?

Accepted Answer

Only complex trusts can be subject to an entity-level Federal income tax. Partnership and limited liability company are passthrough entities and are not subject to entity-level taxation.

Question 18

Which of the following is a typical duty of a trustee?

Accepted Answer

A trustee is responsible for managing and investing the trust's assets according to the terms of the trust instrument. They must act in the best interests of the beneficiaries and make decisions on how to allocate and invest the trust's assets. Modifying the language of the trust instrument to lower taxes falls under the role of a trust attorney or tax professional. Allocating items between income and corpus is a specific task related to the administration of the trust and not a typical duty. Therefore, the best choice is B.

Question 19

When a trust distributes an in-kind asset with a realized loss, most likely this loss cannot be immediately deducted by the first-tier beneficiary.

Accepted Answer

If the distributed asset has a realized loss, the first-tier beneficiary would receive a carryover basis equal to the fair market value of the asset at the time of distribution. The beneficiary cannot immediately deduct the loss. However, if the beneficiary sells the asset at a loss, they may recognize the loss for tax purposes.

Question 20

The trustee of the Epsilon Trust distributed an asset to Telly, a qualifying income beneficiary. The asset's basis to the trust was $10,000, and its fair market value on the distribution date was $25,000. Which of the following statements is true?

Accepted Answer

The answer of The trustee of the Epsilon Trust distributed...

Quiz 28: Income Taxation of Trusts and Estates

The Rodriguez Trust generated $300,000 in alternative minimum taxable income (AMTI) this year. The trust is subject to a marginal Federal income tax rate of:

Tax planning usually dictates that high-income and high-wealth individuals be specified as second-tier beneficiaries of a trust arrangement.

Income beneficiary Turk received $30,000 from the Urgent Trust. Trust accounting income for the year was $100,000. The trust generated $20,000 in cost recovery deductions. How much can Turk deduct with respect to the cost recovery deductions that Urgent generated?

The Prakash Trust is required to pay its entire annual accounting income to beneficiaries Sam and Janet. The trust's personal exemption is:

The Chen Trust is required to distribute its accounting income every year, one-half to Missy Chen, and one-half to The local church's homeless shelter. What is the Chen Trust's personal exemption?

The Philmore Estate is subject to a 40% Federal estate tax rate and a 45% Federal and state income tax rate. Generally, an administrative expense should be claimed on the estate's income tax return.

The unextended due date for a calendar-year trust to file its Form 1041 is March 15.

Generally, an administrative expense attributable to municipal bond interest should be claimed on the estate's Form 706.

Which of the following is a typical duty of an executor of an estate?

Which of the following taxpayers use a Schedule K and K-1 to pass through income, loss, and credit amounts to the owners or beneficiaries?

The Prakash Trust is required to pay its entire annual accounting income to the Daytona Museum, a qualifying charity. The trust's personal exemption is:

Three months after Brianna Timkin died, her executor received the final $40,000 installment from a sale of land that Brianna completed several years ago. Which of the following statements is true?

Which of the following is a typical duty of a trustee?

The Prakash Estate has equal income beneficiaries Sam and Janet. As allowed by the terms of the will, the estate makes no income distributions during the current tax year. The estate's personal exemption is:

The tax rules regarding the income taxation of trusts and estates are included in which Subchapter of the Internal Revenue Code?

The Code defines a "simple trust" as which of the following?

Which of the following taxpayers can be subject to an entity-level Federal income tax?

Which of the following is a typical duty of a trustee?

When a trust distributes an in-kind asset with a realized loss, most likely this loss cannot be immediately deducted by the first-tier beneficiary.

The trustee of the Epsilon Trust distributed an asset to Telly, a qualifying income beneficiary. The asset's basis to the trust was $10,000, and its fair market value on the distribution date was $25,000. Which of the following statements is true?