CHAPTER28REVIEWQUESTIONS - ch19

CHAPTER28REVIEWQUESTIONS - ch19 - CHAPTER 28 INCOME...

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CHAPTER 28 INCOME TAXATION OF TRUSTS AND ESTATES TRUE/FALSE 1. Trusts are created exclusively to reduce tax liabilities. ANS: F Tax consequences generally are secondary to the decision to create a trust. PTS: 1 REF: p. 28-2 | Table 28-1 2. A trust might be used to carry out asset transfers required in a divorce. ANS: T REF: Table 28-1 3. The fiduciary is a separate tax-paying entity. ANS: T Fiduciaries pay tax on accumulated income. PTS: 1 REF: Example 1 4. A remainder beneficiary generally must wait until the trust terminates to receive any distribution of income. ANS: F Fiduciaries generally pay out income at least once each year. PTS: 1 REF: Figure 28-1 5. With respect to a trust, the terms creator , donor , and grantor are synonyms. ANS: T REF: p. 28-4 6. Corpus, principal, and assets of the trust are synonyms. ANS: T REF: p. 28-4 28-1
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Income Taxation of Trusts and Estates 28-2 7. The executor manages the assets of the decedent’s taxable estate. ANS: F The executor manages the assets of the decedent’s probate estate. PTS: 1 REF: Figure 28-1 8. The IRS works to extend as long as possible the term of an estate to the longest period necessary to distribute assets and satisfy debts of the decedent. ANS: F The IRS usually wants to shorten the life of an estate. PTS: 1 REF: p. 28-5 9. Trusts typically use a calendar tax year. ANS: T REF: p. 28-7 10. The fiduciary entity pays tax on the income that it distributes to beneficiaries. ANS: F The entity’s tax falls only on accumulated income, if any. PTS: 1 REF: Example 1 11. A fiduciary entity may incur a liability for the AMT. ANS: T A fiduciary may be subject to the AMT. PTS: 1 REF: p. 28-8 12. The first step in computing a fiduciary’s taxable income is the determination of its distributable net income for the year. ANS: F Fiduciary accounting income is computed first. PTS: 1 REF: Figure 28-2 13. Generally, interest income is allocated to fiduciary income. ANS: T REF: Table 28-3 14. Distribution of an appreciated asset triggers immediate gain recognition to the trust. ANS: F The distribution is tax-deferred unless an election is made. PTS: 1 REF: Example 9 | Example 10 15. Income in respect of a decedent is subject to both income and estate tax at the Federal level. ANS: T REF: Example 11
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Income Taxation of Trusts and Estates 28-3 16. An example of an expense in respect of a decedent is the state income taxes attributable to the taxpayer’s last paycheck, uncollected at death. ANS: T REF: Example 13 17. With respect to a selling expense incurred by an estate in disposing of the decedent’s property, a deduction can be claimed on the Form 1041 only if the executor waives the corresponding deduction in computing the Federal estate tax. ANS: T
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This note was uploaded on 10/09/2008 for the course ACC 3551 taught by Professor Gift during the Spring '08 term at Wilberforce.

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CHAPTER28REVIEWQUESTIONS - ch19 - CHAPTER 28 INCOME...

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