Estate Trust Taxation Flashcards
Tax - REG
How is Gift taxation different from Estate taxation?
Property transferred while taxpayer is living
Tax - REG
What is the annual exclusion amount for a taxpayer’s Gift taxation? What is required to get the exclusion?
$14,000 per year per spouse to each individual
In order to get the exclusion, the recipient must immediately acquire a present interest in the property and get unrestricted access to the property and all of its benefits
Tax - REG
If a Gift is an annuity, what value is used for the Gift?
If the Gift is an annuity, use Present Value to determine the gross Gift
Tax - REG
What is the basic Gift tax calculation?
Gross Gifts
- 1/2 of Gifts (treated as given by spouse)
- Total # of donees x $14,000 exclusion
= Taxable Gift
Tax - REG
How is a Gift taxed if a recipient gains a future ownership in the Gifted property?
Recipient must gain ownership and all rights to property to get the annual exclusion. If recipient merely gains a future ownership, then the present value of the Gift is 100% taxable to donor and cannot exclude from Gift tax calc
Tax - REG
What are the deductions for Gift tax, besides the annual exclusion?
Tuition and medical expenses paid directly to the provider organization (note: NOT books or dorm fees)
Political contributions
Charitable Gifts
Unlimited Gifts to spouse
Tax - REG
What is the basis of Gifted property for the recipient?
If a loss on sale, basis is FMV on the date of the Gift
If a gain on sale, basis is same as donor’s basis
No G/L if donor basis is less than sales price, and sales price is less than FMV @ Gift date
Tax - REG
How/when are Gift tax returns filed?
Calendar-year basis only
Due April 15
Tax - REG
What are the basic characteristics of complex Trust?
Income distributions are optional
Accumulation of income ok
Charitable contributions ok
Contributions using tax-exempt income are not deductible
Allowed personal exemption of $100
Key Point: Distribution of Trust corpus (principal) ok
Tax - REG
What are the basic characteristics of a Simple Trust?
Income distributions mandatory
Accumulation of income disallowed
No charitable contributions
Distribution of Trust corpus DISALLOWED
Allowed personal exemption of $300
Tax - REG
How are Net Operating Losses handled in a Trust?
Trusts can have a Net Operating Loss
Any unused NOL flows through to the beneficiaries
Tax - REG
How are expenses and fees related to tax-exempt income handled in a Trust?
Expenses and fees from tax-exempt income are not deductible for either a Complex or Simple Trust
Tax - REG
When is property transferred in an Estate?
After the death of the donor
Tax - REG
What amount of a decedent’s Estate is exempt from Estate Tax?
The First $5,250,000 is exempt with a 40% tax on amount above that
Tax - REG
How are a decedent’s medical expenses handled with respect to an Estate?
Medical expenses paid after death, but incurred within 1 year of death go on decedents personal tax return
Tax - REG
How is an Estate’s NOL handled?
Estates can have a Net Operating Loss
Any unused NOL flows through to the beneficiaries
Tax - REG
What does a gross Estate consist of?
Cash and Property FMV at death, or alternate valuation.
Tax - REG
What is joint tenancy with respect to an Estate? How is it calculated?
When two non-spouses jointly own property
FMV at death X % Ownership = Amount in Estate
Tax - REG
What is tenancy by entirety?
1/2 of marital assets go to deceased spouses Estate
Tax - REG
What is tenancy in common in an Estate?
A, B, and C own property
If A dies, FMV of As share goes to heirs
Tax - REG
How is Estate tax handled with respect to a beneficiary?
Property received through inheritance not income to recipient
Property value is FMV at date of death or 6 months later
If property is sold prior to 6 month date and the alternative date is used, FMV at date of sale is used to value property
Basis in property automatically assumes LT holding period
Tax - REG
What is distributable net income (DNI)?
DNI = Taxable Income Expenses (from income production)
Trust beneficiaries only pay tax if earnings are distributed
Estate beneficiaries pay tax on DNI, regardless if distributed
Tax - REG
When must a tax exempt organization file a 990-T for Unrelated Business Income?
If a tax exempt organization has more than $1,000 of UBI, it must file a Form 990-T
Tax - REG
What are the requirements for a 501(c)3 organization?
Organized and Operated exclusively for exempt purposes
No earnings can benefit an individual or private shareholder
Cant attempt to influence legislation as a major part of its activities
Cant campaign politically
