CHAPTER28QUIZ - Income Taxation of Trusts and Estates 28-1...

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Income Taxation of Trusts and Estates 28-1 CHAPTER 28 INCOME TAXATION OF TRUSTS AND ESTATES EXAMINATION QUESTIONS ____1. The trustee manages the assets of the decedent’s probate estate. ____2. A fiduciary entity may be subject to the AMT. ____3. Generally, fiduciary fees are never allocated to corpus. ____4. 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. ____5. If the grantor retains the power to revoke the trust, the trustee need not file a Form 1041. 6. The Schmidt Trust generated a net operating loss this year of $200,000. The Trust 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 2006? a. Neither beneficiary gets a deduction this year. b. Whitney deducts $200,000. c. William deducts $120,000. d. Whitney and William each deduct $100,000. e. Whitney, William, and the Trust each deduct $66,667. 7. 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. The trust 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 purposes? a. $80,000 by Barbara and $120,000 by Whitney. b. $70,000 by Barbara and $70,000 by Whitney. c. $84,000 by Barbara and $56,000 by Whitney. d. $56,000 by Barbara and $84,000 by Whitney. e. None of the above. 8. 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
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CHAPTER28QUIZ - Income Taxation of Trusts and Estates 28-1...

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