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CHAPTER_28--INCOME_TAXATION

CHAPTER_28--INCOME_TAXATION - CHAPTER 28-INCOME TAXATION OF...

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CHAPTER 28--INCOME TAXATION OF TRUSTS AND ESTATES CHAPTER 28-- INCOME TAXATION OF TRUSTS AND ESTATES 1. Trusts are created exclusively to reduce tax liabilities. True False 2. A trust might be used by a newly elected politician. True False 3. Like a partnership, the fiduciary is a tax-reporting, but not a separate tax-paying entity. True False 4. An estate’s beneficiary generally must wait until the entity is terminated by the executor to receive any distribution of income. True False 5. With respect to a trust, the terms creator , donor , and grantor are synonyms. True False 6. Corpus, principal, and assets of the trust are synonyms. True False 7. If provided for in the trust agreement, a trust might terminate when the income beneficiary reaches age 30. True False 8. The decedent’s estate must terminate by the third anniversary of the date of death. True False
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9. Trusts typically use a calendar tax year. True False 10. The fiduciary entity pays tax on the income that it retains and adds to corpus. True False 11. A complex trust may incur a liability for the AMT. True False 12. The first step in computing an estate’s taxable income is the determination of its distributable net income for the year. True False 13. Generally, capital gains are allocated to fiduciary corpus, because they relate to investment assets. True False 14. Distribution of an appreciated asset triggers immediate gain recognition to the trust. True False 15. Income in respect of a decedent can be subject to both income and estate tax at the Federal level. True False 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. True False 17. An estate claims an ordinary business deduction for wages paid to employees. True False
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18. Estates and trusts can claim deductions for their costs incurred in maintaining investments in municipal bonds. True False 19. 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 706 only if the executor waives the corresponding deduction in computing the estate’s Federal income tax. True False 20. The executor of the Globe Estate has reported a $10 million gross estate for the entity, and a taxable estate that exceeds the exemption equivalent by $10,000. The estate incurred a $50,000 sales commission in disposing of the decedent’s assets. There was no exempt income recognized by Globe this year. The executor can claim a $10,000 deduction for the commission against the taxable estate, thereby eliminating the estate tax liability. The remaining $40,000 can be deducted on the Form 1041 for the year of the expenditure. True False 21. Cost recovery deductions are assigned pro rata to the recipients of an estate’s accounting income.
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