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Exam 28: Income Taxation of Trusts and Estates

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Question 31

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This year,the Nano Trust reported $50,000 entity accounting income and $40,000 distributable net income (DNI) .Nano distributed $60,000 cash to Horatio,its sole income beneficiary.Nano is a simple trust.Nano's distribution deduction is:

A) $40,000.
B) $50,000.
C) $60,000.
D) $0.

E) A) and D)
F) A) and C)

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Question 32

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The Prasad Trust operates a welding business.Its current-year cost recovery deductions properly amount to $75,000.Prasad's accounting income was $100,000,of which $40,000 was distributed to first-tier beneficiary Chuck,$35,000 was distributed to second-tier beneficiary Ruby,and $25,000 was accumulated by the trustee.Ruby also received a $25,000 corpus distribution.Prasad's DNI was $80,000.Identify the treatment of Prasad's cost recovery deductions.

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Prasad Trust's cost recovery deductions ...

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Question 33

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The executor of the Globe Estate has reported a $10 million gross estate for the entity,and a taxable estate that exceeds the exemption equivalent by $10,000.The estate incurred a $50,000 sales commission in disposing of the decedent's assets.There was no exempt income recognized by Globe this year.The executor can claim a $10,000 deduction for the commission against the taxable estate,thereby eliminating the estate tax liability.The remaining $40,000 can be deducted on the Form 1041 for the year of the expenditure.

What is a simple trust? A complex trust?

An estate claims an ordinary business deduction for wages paid to employees.

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

The Form 1041 of a calendar-year trust is due on ____________________ 15.

Estates and trusts can claim deductions for their costs incurred in maintaining investments in municipal bonds.

"First-tier distributions" allowed by the will or trust document are made at the discretion of the executor or trustee.

Corpus,principal,and assets of the trust are synonyms.

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.

During the current year,the Madison Trust received $40,000 of taxable interest income,paid trustee's commissions of $4,000,and had no other income or expenses.The trust instrument requires that $20,000 be paid annually to Marilyn,and $40,000 be paid annually to Domingo.How much gross income must Marilyn and Domingo recognize?

The Jain Estate is required to pay its entire annual accounting income to Sam and Janet.The estate's personal exemption is:

The fiduciary entity pays tax on the income that it retains and adds to corpus.

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

How is entity accounting income computed? What role does it play in Subchapter J?

Harry,the sole income beneficiary,received a $40,000 distribution from the Lucy Trust,in a year when the trust's distributable net income was $30,000.Harry's AGI can increase by as much as $40,000.

Trusts are created exclusively to reduce tax liabilities.

Harry,the sole income beneficiary,received a $40,000 distribution from the Lucy Trust,in a year when the trust's distributable net income was $50,000.Harry's AGI can increase by as much as $50,000.

The first step in deriving the fiduciary's taxable income is to determine its ______________________________.