Question 1

For each of the following independent statements, choose the best answer.
-The entity's AMT preferences and adjustments pass through to the income beneficiaries.

Accepted Answer

The answer of For each of the following independent statements,...

Question 2

For each of the following independent statements, choose the best answer.
-The entity was created by either a decedent or a living person.

Accepted Answer

The answer of For each of the following independent statements,...

Question 3

Beginning with its________ tax year, an estate must remit quarterly Federal estimated income tax payments.

Accepted Answer

The answer of Beginning with its________ tax year, an estate...

Question 4

For each of the following items, insert the best term or phrase. An answer choice may be used more than once, but only one choice is the best for each descriptive phrase.
-The fiduciary in charge of a trust.

Accepted Answer

The trustee is the fiduciary in charge of a trust.

Question 5

For each of the following items, insert the best term or phrase. An answer choice may be used more than once, but only one choice is the best for each descriptive phrase.
-The person who transfers assets to a trust.

Accepted Answer

The grantor is the person who transfers assets to a trust.

Question 6

For each of the following independent statements, choose the best answer.
-The entity can choose between the cash and accrual methods of reporting its income and deductions.

Accepted Answer

Both estates and complex trusts have the option to choose between cash and accrual methods of reporting their income and deductions.

Question 7

For each of the following items, insert the best term or phrase. An answer choice may be used more than once, but only one choice is the best for each descriptive phrase.
-A trust whose income can be distributed to beneficiaries and in amounts at the trustee's discretion.

Accepted Answer

A sprinkling trust allows for discretionary distributions of income among multiple beneficiaries.

Answer: I 
 The trustee is the person or entity in charge of managing the trust and making distributions according to the trust's terms.

Other choices may be relevant for other types of trusts, but H and I are the best for the given description.

Question 8

For each of the following independent statements, choose the best answer.
-Undistributed income is subject to the additional tax on net investment income.

Accepted Answer

Undistributed income in both estates and complex trusts is subject to the additional tax on net investment income.

Question 9

For each of the following independent statements, choose the best answer.
-The entity typically can choose any fiscal tax year.

Accepted Answer

The answer of For each of the following independent statements,...

Question 10

For each of the following items, insert the best term or phrase. An answer choice may be used more than once, but only one choice is the best for each descriptive phrase.
-A trust whose remainder beneficiary is its grantor.

Accepted Answer

A reversionary trust is one in which the remainder beneficiary is the grantor.

Question 11

For each of the following independent statements, choose the best answer.
-The entity is an information-reporting, not a tax-paying, taxpayer.

Accepted Answer

The answer of For each of the following independent statements,...

Question 12

For each of the following independent statements, choose the best answer.
-The entity must file an income tax return if its gross income for the year is $600 or more.

Accepted Answer

Both estates and complex trusts are required to file an income tax return if their gross income for the year is $600 or more.

Question 13

For each of the following items, insert the best term or phrase. An answer choice may be used more than once, but only one choice is the best for each descriptive phrase.
-An estate always is created upon the death of this party.

Accepted Answer

An estate is created upon the death of the decedent.

Answer: C
 An executor is the personal representative appointed by the court to administer the estate of a deceased person.

Answer: D
 A grantor is someone who transfers property to another party through a deed or other legal instrument.

Answer: E
 An administrator is a person appointed by the court to manage the estate of a deceased person who died intestate (without a will).

Answer: G
 A simple estate is an estate administered using simplified procedures, typically when the estate is small and the assets are easy to distribute.

Answer: F
 A reversionary estate is an estate that reverts back to the grantor or the grantor's estate after a certain event occurs, such as the death of the life estate holder.

Answer: I
 A trustee is a person or entity appointed to manage a trust, which is a legal arrangement in which one party (the trustee) holds and manages assets for the benefit of another party (the beneficiary).

Question 14

For each of the following independent statements, choose the best answer.
-The entity has a legal identity separate from its beneficiaries.

Accepted Answer

Both estates and complex trusts have a legal identity separate from their beneficiaries.

Question 15

For each of the following independent statements, choose the best answer.
-The entity's management generally is directed by the controlling document as to the date of the entity's termination.

Accepted Answer

The answer of For each of the following independent statements,...

Question 16

For each of the following independent statements, choose the best answer.
-For a calendar year entity, the Form 1041 has an unextended due date of April 15.

Accepted Answer

The Form 1041 is the income tax return for both estates and complex trusts. They both have an unextended due date of April 15th for a calendar year entity.

Question 17

For each of the following independent statements, choose the best answer.
-A decedent created the entity.

Accepted Answer

The creation of an entity is a tax attribute specific to estates, as complex trusts are not created by a decedent, but rather by a trust instrument during the grantor's lifetime.

Question 18

For each of the following items, insert the best term or phrase. An answer choice may be used more than once, but only one choice is the best for each descriptive phrase.
-A trust that is required to distribute annual accounting income.

Accepted Answer

A simple trust is characterized by its requirement to distribute all its income annually to the beneficiaries, without allowing for income to be accumulated or for distributions of the principal.

Question 19

For each of the following independent statements, choose the best answer.
-The entity is entitled to a personal exemption of $600.

Accepted Answer

The answer of For each of the following independent statements,...

Question 20

For each of the following independent statements, choose the best answer.
-Distributable net income is used to account for the entity's distributions to its beneficiaries.

Accepted Answer

Distributable net income (DNI) is a tax concept used to determine the taxable income of estates and complex trusts for purposes of determining the amount of income that must be distributed to beneficiaries. Therefore, DNI is a tax attribute of both estates and complex trusts.

Quiz 20: Income Taxation of Trusts and Estates

For each of the following independent statements, choose the best answer. -The entity's AMT preferences and adjustments pass through to the income beneficiaries.

For each of the following independent statements, choose the best answer. -The entity was created by either a decedent or a living person.

Beginning with its________ tax year, an estate must remit quarterly Federal estimated income tax payments.

For each of the following items, insert the best term or phrase. An answer choice may be used more than once, but only one choice is the best for each descriptive phrase. -The fiduciary in charge of a trust.

For each of the following items, insert the best term or phrase. An answer choice may be used more than once, but only one choice is the best for each descriptive phrase. -The person who transfers assets to a trust.

For each of the following independent statements, choose the best answer. -The entity can choose between the cash and accrual methods of reporting its income and deductions.

For each of the following items, insert the best term or phrase. An answer choice may be used more than once, but only one choice is the best for each descriptive phrase. -A trust whose income can be distributed to beneficiaries and in amounts at the trustee's discretion.

For each of the following independent statements, choose the best answer. -Undistributed income is subject to the additional tax on net investment income.

For each of the following independent statements, choose the best answer. -The entity typically can choose any fiscal tax year.

For each of the following items, insert the best term or phrase. An answer choice may be used more than once, but only one choice is the best for each descriptive phrase. -A trust whose remainder beneficiary is its grantor.

For each of the following independent statements, choose the best answer. -The entity is an information-reporting, not a tax-paying, taxpayer.

For each of the following independent statements, choose the best answer. -The entity must file an income tax return if its gross income for the year is $600 or more.

For each of the following items, insert the best term or phrase. An answer choice may be used more than once, but only one choice is the best for each descriptive phrase. -An estate always is created upon the death of this party.

For each of the following independent statements, choose the best answer. -The entity has a legal identity separate from its beneficiaries.

For each of the following independent statements, choose the best answer. -The entity's management generally is directed by the controlling document as to the date of the entity's termination.

For each of the following independent statements, choose the best answer. -For a calendar year entity, the Form 1041 has an unextended due date of April 15.

For each of the following independent statements, choose the best answer. -A decedent created the entity.

For each of the following items, insert the best term or phrase. An answer choice may be used more than once, but only one choice is the best for each descriptive phrase. -A trust that is required to distribute annual accounting income.

For each of the following independent statements, choose the best answer. -The entity is entitled to a personal exemption of $600.

For each of the following independent statements, choose the best answer. -Distributable net income is used to account for the entity's distributions to its beneficiaries.