Estates and trusts

Question 1

types of trusts

Answer 1

An inter vivos trust is created during the grantor’s lifetime. A testamentary trust will begin when the grantor dies and he has provided for a trust in his will. The testamentary trust becomes valid at Cord’s death. Cord’s spouse can serve as both the trustee and personal representative of the trust.

Question 2

simple trusts

Answer 2

Simple trusts may have tax-exempt income, but the other three conditions listed must be met for the current year for a trust to be considered simple and not complex.Distributes all income currently,Does not distribute from trust corpus,Does not deduct charitable contributions

Question 3

testa

Answer 3

A testamentary trust is created by an individual’s will at or following the date of the grantor’s death.

Question 4

Trust

Answer 4

The written trust instrument would be the starting place for creating any trust. The written trust instrument would provide for payment of fees to the trustee and designate any and all beneficiaries.

Transferring the cash to the trustee would complete the creation of the trust.

Question 5

Complex trust

Answer 5

A complex trust is any trust that does not qualify as a simple trust.

Question 6

DNI

Answer 6

A distribution from estate income that was currently required was made to the estate’s sole beneficiary during its calendar year. The maximum amount of the distribution to be included in the beneficiary’s gross income is limited to the estate’s distributable net income (DNI).

Distributable net income is an amount that sets the limit on the deduction of a domestic estate or trust for distributions to beneficiaries. It also sets the maximum amount of the distribution taxable to the beneficiary.

Question 7

trustee

Answer 7

Generally, a trustee would have the power to sell trust property, pay management expenses, and employ a CPA to prepare trust tax returns. The trustee would not typically accumulate income because the income would then be taxed at a very high tax rate.

Question 8

Allocations

Answer 8

The property tax is an annual payment that is typically allocated to the income of a trust. Because the monthly mortgage payment is for the only trust asset, it would be allocated to the principal of the trust.

Question 9

termination of trust

Answer 9

A trust will terminate based upon the written document. In this case, once the principal reverted back to the creator of the trust, Dart, the trust would terminate.

Question 10

gross income inclusion

Answer 10

the DNI is allocatiion based on the relative value of the distributions

Question 11

Tax

Answer 11

ncome of an estate or trust that is taxed to that entity uses a separate tax rate for estates and trusts. The tax rate accelerates quickly.

Question 12

beneficiary tax

Answer 12

Beneficiaries are taxed on their share of the trusts income distributed to them, but not more than their share of DNI of the trust.

Question 13

personal exemption ( no standard deduction)

Answer 13

There is no standard deduction for a trust or an estate (IRC Section 63(c)(6)(D)). Instead, the personal exemption for an estate is $600, for a simple trust is $300, and for a complex trust is $100,

Question 14

estate /trust

Answer 14

Income earned by an estate is subject to income tax. Generally, income of the decedent up to the date of death is reported on the final Form 1040. Income earned after death is reported by the estate’s fiduciary on Form 1041. An estate may adopt either a calendar year or fiscal year. Trusts, on the other hand, must use a calendar year. (IRC Section 644)

Question 15

termination of trust

Answer 15

The trust will automatically end on the death of Hardy. A trust terminates when the beneficiary has died. Hardy is the only beneficiary, so the trust expires when he passes.

Question 16

tax#101584

Answer 16

While the trust will receive the income, it is then paid out to Carlt’s mother currently (IRC Sections 671 and 674). Because Carlt retained the power to revoke the income interest and the remainder interest, he still controls the trust and he will be taxed on the trust income.

Question 17

Reversionary

Answer 17

Reversionary trust income is taxed to the grantor, even though the income is distributed to the beneficiaries.

Question 18

indirect expenses

Answer 18

Indirect expenses of a trust such as trustee fees are considered to apply to all income. The ratio of taxable income to total income (not including income allocated to corpus) is used to determine the deduction

Question 19

Question #101465

Answer 19

?

Question 20

admin expenses

Answer 20

Ordinary and necessary administration expenses are deductible on either the fiduciary income tax return (Form 1041) or the federal estate tax return (Form 706), but not both.

Question 21

Gross estate deductions

Answer 21

Those costs associated with adminstering the estate ; funeral expenses,admin,indebtness of prop in gross estate,claims against the estate, medical expenses not on final return

Question 22

Adj gross estate deductions

Answer 22

Unified tax credit,charitible bequests,marital deduction

Question 23

proceeds of life insurance payable to the estates executor

Answer 23

included in the decedents gross estate

Question 24

proceeds paid to the beneficiary

Answer 24

are not includable in the decedents gross estate unless the decedent retained control over the policy