ch28 - 1. Tax planning motivations usually are secondary to...

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Unformatted text preview: 1. Tax planning motivations usually are secondary to other objectives in deciding whether to create a trust. *a. True b. False 2. A trust might be used by the parties to an impending divorce. *a. True b. False 3. Like a limited liability company, the fiduciary is a tax-reporting, but not a separate tax-paying entity. a. True *b. False 4. An estates income beneficiary generally must wait until the entity is terminated by the executor to receive any distribution of income. a. True *b. False 5. With respect to a trust, the terms creator , donor , and grantor are synonyms. *a. True b. False 6. Corpus, principal, and assets of the trust are synonyms. *a. True b. False 7. If provided for in the controlling agreement, a trust might terminate when the income beneficiary graduates with a law degree. *a. True b. False 8. The decedents estate must terminate within four years of the date of death. a. True *b. False 9. Trusts usually are required to use a calendar tax year *a. True b. False 10. A complex trust pays tax on the income that it retains and adds to corpus. *a. True b. False 11. A complex trust may incur a liability for the AMT. *a. True b. False 12. The first step in computing an estates taxable income is the determination of its gross income for the year. a. True *b. False 13. Generally, capital gains are allocated to fiduciary income, because they relate to investment assets. a. True *b. False 14. Gain or loss is recognized by a trust when it distributes a non-cash asset. a. True *b. False 15. Income in respect of a decedent can be subject to both income and estate tax at the Federal level. *a. True b. False 16. An example of income in respect of a decedent is the taxpayers last paycheck, uncollected at death. *a. True b. False 17. When a trust operates a trade or business, it can claim a deduction for wages paid to employees. *a. True b. False 18. Estates and trusts can claim Federal income tax deductions for costs incurred in maintaining investments in U.S. state and local bonds. a. True *b. False 19. The Bard Estate incurs a $25,000 fee in disposing of the real property of the decedent. The deduction is claimed against the Federal estate tax, unless by election it is claimed on the estates income tax return. *a. True b. False 20. The Bard Estate incurs a $25,000 fee in disposing of the real property of the decedent. The deduction can be claimed $10,000 against the Federal estate tax, and $15,000 on the estates income tax return. *a. True b. False 21. Cost recovery deductions are assigned pro rata to the recipients of an estates distributable net income (DNI). a. True *b. False 22. An estate operates a manufacturing business. It can claim a domestic production activities deduction (DPAD)....
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ch28 - 1. Tax planning motivations usually are secondary to...

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