Ch23TB - 889 Chapter 23 Income Taxation of Trusts and...

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© 2009 CCH. All Rights Reserved. Chapter 23 889 Chapter 23 Income Taxation of Trusts and Estates TRUE-FALSE QUESTIONS—CHAPTER 23 The decedent’s f nal income tax return is due four months after the date of death. 1. A joint income tax return which includes a decedent may not be f led if the surviving spouse has remarried before the 2. end of the tax year in which the decedent dies. The decedent’s medical expenses paid by the estate can be treated as paid at the time they are incurred and deducted 3. on the decedent’s f nal income tax return as long as they are paid within two years of the decedent’s death. A decedent is allowed a full personal exemption on a f nal income tax return regardless of date of death. 4. Income in respect of the decedent can only be included on the decedent’s f nal income tax return. 5. All estates must f le an estate income tax return regardless of gross income. 6. The estate’s f rst income tax return must cover a period of 12 months. 7. An estate is entitled to the standard deduction. 8. Income distributed to bene f ciaries by an estate will retain the same character on the bene f ciaries’ income tax returns 9. as it had on the estate’s income tax return. In determining what is income to a trust, federal laws always take precedence over laws of the state in which the trust 10. is created. It is possible for one person to be both an income bene f ciary and a remainder bene f ciary of the same trust. 11. Only trusts with gross income of $600 or more during a tax year must f le a federal income tax return. 12. The basis of trust assets would usually be a carryover basis from the trust grantor. 13. No personal exemption is allowed on the f nal income tax return of a trust. 14. A simple trust must distribute all of its taxable income each year. 15. All estates must f le a Form 1041 when they have gross income of at least $500. 16. A trust agreement may provide explicit instructions on how trust property is to be managed, invested, and paid out. 17. Thus, a grantor may control from the grave what he could have controlled while he was alive. The executor of an estate can decide to take administration expenses on either the Form 706 or Form 1041. 18. For a normal tax year (not a leap year), the 65 day rule must be utilized for an estate by March 6 of the following 19. calendar year. When an estate or trust terminates all tax credits are lost. 20. John Henry died on July 31, 2009. His f nal 1040 is due by 11/15/09 (3 1/2 months after his date of death). 21. Medical expenses paid by the estate within one year of a taxpayer’s death can be taken on either this decedent’s f nal 22. 1040 or the estate’s 706 return. A trust that is funded and established on September 1, 2009 will have a tax year of less than 12 months.
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This note was uploaded on 10/17/2010 for the course ACTG 310 taught by Professor Neal during the Spring '10 term at N.E. Illinois.

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Ch23TB - 889 Chapter 23 Income Taxation of Trusts and...

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