Upon Barbaras death the trust corpus is to be distributed to Barbaras children

Upon barbaras death the trust corpus is to be

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charged to trust corpus. Upon Barbara’s death, the trust corpus is to be distributed to Barbara’s children on a pro rata basis. During the first year of the trust, the trustee distributes $23,000 in dividend income to Barbara. The trust also has capital gains of $20,000. a. What is the trust’s tax basis in the securities transferred to it by Glen?b. Who is taxed on the dividend income? c. Who is taxed on the capital gains? Solution:a. $160,000. b. Barbara as beneficiary. c. The trust, per the trust document. 35. IRD Thomas died on August 15 of the current year. On September 2, his estate received a check for $2,000 from Thomas’s former employer for his final pay period. On September 18, Thomas’s estate received a $70,000 distribution from his employer’s retirement plan. Both Thomas and the estate are cash-basis, calendar-year taxpayers. How much income must the estate report as a result of receiving these items? Solution:$72,000 of IRD, assuming none of the distribution from the retirement plan represented income on which taxes had already been paid by the decedent prior to death. 36. Trust Income Wayne created a trust six years ago for the benefit of his children. In the current year, when the value of the trust assets is $1,000,000, Wayne transfers additional property valued at $300,000 into the trust. Because Wayne is concerned that he might need some income in a future year if his investments do not perform well, he retains the right to receive the income from this latter property in any year in which his gross income falls below a specified amount. The trust received $100,000 in income this year: $30,000 from the newly transferred assets and $70,000 from the original assets. The entire $100,000 income is distributed directly to Wayne's children before the end of the year. Who is taxed on the income? Solution:$70,000 is taxed to the children; $30,000 is taxed to Wayne, the income from the newly contributed assets, as he retained rights to that income. 37. Trust Income In June of year 1, Angelina (a calendar-year taxpayer) becomes the beneficiary of a new calendar-year trust. At the same time, Angelina also becomes the beneficiary of an estate that elects a March 31 fiscal year-end. During year 1, Angelina receives income distributions of $12,000 from the trust and $18,000 from the estate. a. In which year does Angelina report the income from the trust? b. In which year does Angelina report the income from the estate? Solution:a. $12,000 from the trust in year 1.
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10 Solutions Manual for Taxation for Decision Makersb. $18,000 from the estate in year 2. 38. Gift Tax Calculation Carolyn has made no previous taxable gifts. Determine her gift tax (before credits) if she makes $650,000 in taxable gifts in the current year. Solution:$208,300 = $155,800 + [35% x ($650,000 - $500,000)]. 39. Gift Tax CalculationBenjamin has made no previous taxable gifts. Determine his gift tax if he makes $14,000,000 (after annual exclusions) in taxable gifts in 2011.
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