7090966-Solutions - CHAPTER 27 INCOME TAXATION OF TRUSTS...

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CHAPTER 27 INCOME TAXATION OF TRUSTS AND ESTATES SOLUTIONS TO PROBLEM MATERIALS Status: Q/P Question/ Present in Prior Problem Topic Edition Edition 1 Issue ID Unchanged 1 2 Parties to a fiduciary entity Unchanged 2 3 Trusts and income shifting Unchanged 3 4 Fiduciaries and the AMT Unchanged 4 5 Simple versus complex trust; personal exemptions Unchanged 12 6 Determining taxable income: five-step approach Unchanged 5 7 Distributions of appreciated property Unchanged 6 8 Disallowance of § 212 deductions Unchanged 11 9 Cost recovery deductions of a fiduciary Unchanged 7 10 Charitable contributions of a fiduciary Unchanged 8 11 Issue ID Unchanged 9 12 Grantor trust rules Unchanged 10 13 Fiduciary AMT computations Modified 13 14 Attributes of trusts and estates Unchanged 14 15 Charitable contributions Modified 15 16 Computing DNI, taxable income Unchanged 16 17 Computing DNI, taxable income Unchanged 17 18 Separate share rule Modified 18 19 Tier distributions Modified 19 20 Constitution of DNI Unchanged 20 21 Computing DNI, taxable income Unchanged 21 22 Income in respect of a decedent Unchanged 22 23 Termination year losses Unchanged 23 27-1
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27-2 2004 Comprehensive Volume/Solutions Manual CHECK FIGURES 13. 15. 16.a. 16.b. 16.c. 16.d. 17.a. 17.b. 17.c. 17.d. 18.a. 18.b. $18,850. $0; $7,500; $15,000. $25,000. $66,000. $14,700. $22,000. $30,000. $81,000. ($300). $27,000. $25,000. $15,000. 19.a. 20. 21.a. 21.b. 21.c. 21.d. $50,000 first-tier, $70,000 total gross income. $12,000 (div.), $8,000 (taxable int.), $4,000 (exempt int.), $6,000 (passive); same for both. $100,000. $90,000. $37,900. Lydia $16,000; Kent $12,000 taxable part of distribution.
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Income Taxation of Trusts and Estates 27-3 DISCUSSION QUESTIONS 1. Taxpayers create trusts for a variety of reasons. Some trusts are established primarily for tax purposes, while others are designed to accomplish a specific financial goal or to provide for the orderly management of assets in case of an emergency. The most commonly encountered reasons for creating a fiduciary entity include the following. To hold life insurance policies on the decedent, as part of an estate plan to remove such policies from the gross estate. To manage assets, reduce probate costs, and assure the privacy of the distribution of assets near the end of the grantor’s life. To provide funds for an advanced education, accumulating income at a lower tax rate than that to which the grantor is subject. To hold or manage the assets of the grantor while he or she is in the military, governmental service, overseas, or in some other way divorced from the daily management of the assets. To manage the assets of a tax-sheltered retirement fund, corporate liquidation, or divorcing couple in an objective manner. Table 27-1 2. The parties to a trust include a grantor, trustee, and one or more beneficiaries. The parties to an estate include the decedent, the executor or administrator, and one or more beneficiaries. In each case, at least two different parties should be involved. Figure 27-1 3. Fiduciary taxation has fallen prey to the “soak the rich” approach to tax reform.
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This note was uploaded on 03/08/2010 for the course ACCT 3500 taught by Professor Smith during the Spring '10 term at Kwantlen Polytechnic University.

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7090966-Solutions - CHAPTER 27 INCOME TAXATION OF TRUSTS...

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