Reyes contributed assets to a trust designating

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Chapter 12 / Exercise 3
Macroeconomics for Today
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43. Reyes contributed assets to a trust, designating daughter Maria as the income beneficiary, and grandson Julio as theremainder beneficiary. This year, fiduciary accounting income was $50,000. The trustee paid $5,000 of this amountas Julio’s high school tuition. Reyes pays Federal income tax on $5,000 for the year.a. Trueb. FalseANSWER:TrueRATIONALE: Grantor trust rules apply when the entity satisfies grantor obligations.
44. Reyes contributed assets to a trust, designating daughter Maria as the income beneficiary, and grandson Julio as theremainder beneficiary. This year, fiduciary accounting income was $50,000. The trustee accumulated $5,000 of thisamount and added it to trust corpus. Reyes pays Federal income tax on $5,000 for the year.
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Macroeconomics for Today
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Chapter 12 / Exercise 3
Macroeconomics for Today
Tucker
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Chapter 20: Income Taxation of Trusts and Estates45. The unextended due date for a calendar-year trust to file its Form 1041 is March 15.
46. Tax planning usually dictates that high-income and high-wealth individuals be specified as second-tier beneficiariesof a trust arrangement.
47. When a trust distributes an in-kind asset with a realized loss, most likely this loss cannot be immediately deductedby the first-tier beneficiary.a. Trueb. FalseANSWER:TrueRATIONALE: The loss should be directed to the trust, which almost always is in a higher tax bracket than are the beneficiaries. Further, the related-party rules likely disallow the loss for the beneficiary.
48. The Philmore Estate is subject to a 40% Federal estate tax rate and a 45% Federal and state income tax rate.Generally, an administrative expense should be claimed on the estate’s income tax return.
49. Generally, an administrative expense attributable to municipal bond interest should be claimed on the estate’s Form706.

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