Income Taxation of Trusts and Estates
INCOME TAXATION OF TRUSTS AND ESTATES
The trustee manages the assets of the decedent’s probate estate.
A fiduciary entity may be subject to the AMT.
Generally, fiduciary fees are never allocated to corpus.
The Benson Trust reports $20,000 business income and $10,000 exempt interest income,
and it paid a $3,000 fiduciary fee.
Benson’s distributable net income includes $9,000 for
the interest income.
If the grantor retains the power to revoke the trust, the trustee need not file a Form 1041.
The Schmidt Trust generated a net operating loss this year of $200,000.
terminates December 31, 2006.
Whitney receives $80,000 of corpus upon termination
and William receives the remaining $120,000.
Both Whitney and William are calendar
year taxpayers. How much of this loss can the Trust, Whitney, or William deduct in
Neither beneficiary gets a deduction this year.
Whitney deducts $200,000.
William deducts $120,000.
Whitney and William each deduct $100,000.
Whitney, William, and the Trust each deduct $66,667.
During the current year, a trust received $160,000 of taxable interest income, paid
trustee's commissions of $20,000, and had no other income or expenses.
instrument requires that $80,000 be paid annually to Barbara, and $120,000 be paid
annually to Whitney.
How much income must Barbara and Whitney recognize for tax
$80,000 by Barbara and $120,000 by Whitney.
$70,000 by Barbara and $70,000 by Whitney.
$84,000 by Barbara and $56,000 by Whitney.
$56,000 by Barbara and $84,000 by Whitney.
None of the above.
The Wright Estate generated distributable net income this year of $200,000, one-fifth of
which was tax-exempt interest, and the balance of which was long-term capital gain.
Peter Wright, the sole income beneficiary of the Estate, received a distribution of the