24211_ch25_final_p001-008

See example 12 p 25 15 b 4000 see example 12 p

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Unformatted text preview: 4,000. [See Example 12, p. 25-14, and Reg. 1.661(c)-1.] Note that whatever amount is deducted by the trust is taxable to the beneficiaries. 25-4 Chapter 25 Income Taxation of Estates and Trusts 25-24 a. $6,000 $10,000 charitable donation $60,000 taxable trust income $100,000 trust income [See Example 4, p. 25-8, and Reg. 1.642(c)-3(b)(1).] b. $3,000 $55,000 trustee fee $60,000 taxable trust income $100,000 trust income [See Example 3, p. 25-7, and Reg. 1.652(b)-3(b).] c. 25-25 a. $6,500 rent expense (all allocable to taxable rent). [See p. 25-6 and Reg. 1.652(b)-3(a).] Taxable interest Rents $25,000 11,000 $36,000 Less: Rent expense Deductible trustee fee* (2,400) (900) $32,700 [$1,000 fee $36,000 taxable trust gross income $40,000 trust gross income Plus: Net nontaxable interest ($4,000 $100 trustee fee allocable to nontaxable trust income) DNI 3,900 $36,600 [See Example 13, pp. 25-14 and 25-15, and 643(a).] b. Taxable interest Rents LTCG (taxable even though not distributable) $25,000 11,000 9,000 $45,000 Less: Rent expense Deductible trustee fee Deduction for distribution to beneficiaries (taxable DNI) Exemption (simple trust) Trust taxable income (See Example 13 and pp. 25-14 and 25-15.) (2,400) (900) (32,700) (300) $ 8,700 Solutions to Problem Materials 25-5 c. $960 (at 2011 tax rates). Because the entire $8,700 of taxable income represents LTCG, the trust's 2011 tax liability equals 0% capital gain rate of the first $2,300 of taxable income (the amount of taxable income subject to the 15% rate), $0, plus 15% capital gains tax on the remaining $6,400 of income ($8,700 $2,300) or $960. Taxable dividends Rents $10,000 30,000 $40,000 25-26 a. Less: Rent expense Deductible trustee fee* Taxable DNI *$5,000 fee $40,000 taxable trust gross income $50,000 trust gross income (7,500) (4,000) $28,500 Plus: Net nontaxable interest ($10,000 $1,000 trustee fee allocable to trust nontaxable income) DNI 9,000 $37,500 [See Example 13, pp. 25-13 through 25-16, and 643(a).] b. Dividends Rents LTCG $10,000 30,000 15,000 $5...
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