-Estate Trust Taxation Flashcards Preview

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Flashcards in -Estate Trust Taxation Deck (24)
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1
Q

How is Gift taxation different from Estate taxation?

A

Property is transferred while taxpayer is living.

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2
Q

What is the annual exclusion amount for a taxpayer’s Gift taxation? What is required to get the exclusion?

A

The exclusion is $15,000 per year per spouse to each individual.

This means that a married couple can gift $30,000 and the gift remains exempt from gift tax.

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.

3
Q

If a Gift is an annuity, what value is used for the Gift?

A

If the Gift is an annuity, use Present Value to determine the gross Gift.

4
Q

What is the basic Gift tax calculation?

A

Gross Gifts

- 1/2 of Gifts (treated as given by spouse)

- (Total # of donees x 15,000 Exclusion)

= Taxable Gifts

5
Q

How is a Gift taxed if a recipient gains a future ownership in the Gifted property?

A

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.

6
Q

What are the deductions for Gift tax, besides the annual exclusion?

A

Deductions for gift tax include:

  • Tuition and medical expenses paid directly to the provider organization (Note: NOT books or dorm fees)
  • Political contributions (Note: these are typically not deductible, but they are deductible for the gift tax calculation)
  • Charitable Gifts
  • Unlimited Gifts to spouse
7
Q

What is the basis of Gifted property for the recipient?

A

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 at Gift date.

8
Q

How/when are Gift tax returns filed?

A

Gift tax returns are filed on a calendar-year basis only.

Due date is April 15.

9
Q

What are the basic characteristics of complex Trust?

A

Characteristics of complex Trust:

  • Income distributions are optional.
  • Accumulation of income is ok.
  • Charitable contributions are ok.
  • Contributions using tax-exempt income are not deductible.
  • Allowed personal exemption of $100.

Key Point: Distribution of Trust corpus (principal) is ok.

10
Q

What are the basic characteristics of a Simple Trust?

A

Characteristics of Simple Trust:

  • Income distributions are mandatory.
  • Accumulation of income is disallowed.
  • No charitable contributions.
  • Distribution of Trust corpus is DISALLOWED.
  • Allowed a $300 personal exemption - even under TCJA
11
Q

How are Net Operating Losses handled in a Trust?

A

Trusts can have a Net Operating Loss.

Any unused NOL flows through to the beneficiaries.

12
Q

How are expenses and fees related to tax-exempt income handled in a Trust?

A

Expenses and fees from tax-exempt income are not deductible for either a Complex or Simple Trust.

13
Q

When is property transferred in an Estate?

A

After the death of the donor

14
Q

What amount of a decedent’s Estate is exempt from Estate Tax?

A

$11,180,000

15
Q

How are a decedent’s medical expenses handled with respect to an Estate?

A

Medical expenses paid after death but incurred within 1 year of death go on decedents personal tax return.

16
Q

How is an Estate’s NOL handled?

A

Estates can have a Net Operating Loss.

Any unused NOL flows through to the beneficiaries.

17
Q

What makes up a Gross Estate?

A

A gross estate consists of Cash and Property FMV at death, or alternate valuation.

18
Q

What is joint tenancy with respect to an Estate? How is it calculated?

A

When two non-spouses jointly own property.

FMV at death X % Ownership = Amount in Estate

19
Q

What is tenancy by entirety?

A

1/2 of marital assets go to deceased spouse’s Estate

20
Q

What is tenancy in common in an Estate?

A

A, B, and C own property.

If A dies, FMV of A’s share goes to heirs.

21
Q

How is Estate tax handled with respect to a beneficiary?

A

How to handle estate tax with respect to a beneficiary:

  • Property received through inheritance not income to the recipient.
  • Property value is FMV at the date of death or 6 months later.
  • If the property is sold prior to the 6-month date and the alternative date is used, FMV at the date of sale is used to value property.
  • Basis in property automatically assumes LT holding period.
22
Q

What is distributable net income (DNI)?

A

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.
23
Q

When must a tax-exempt organization file a 990-T for Unrelated Business Income?

A

If a tax-exempt organization has more than $1,000 of UBI, it must file a Form 990-T.

24
Q

What are the requirements for a 501(c)3 organization?

A

Requirements for a 501(c)3 organization:

  • Organized and Operated exclusively for exempt purposes.
  • No earnings can benefit an individual or private shareholder.
  • Can’t attempt to influence legislation as a major part of its activities.
  • Can’t campaign politically