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REG > Estates, Trusts and Gift Taxes > Flashcards

Estates, Trusts and Gift Taxes Flashcards

1
Q

Trust and estate must file what

A

Tax Return

1041

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2
Q

What is the difference between Estate Income Tax and Estate Tax

A

Estate Income Tax - 1041 paying tax on the estate and trust on whatever is not distributed - every year

Estate Tax - Valuation Tax - paid once when you die

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3
Q

What is the difference between a 706, 709, 1041

A

1040 - individual tax return when you are alive

709 - you are alive and give more than 14K per year - this is a gift tax return

706- after you die - 9 months after your death - pay taxes on your estate - 40-50%

1041 - filed in all years after your death until all the money is distributed to people

K-1 - money that is distributed that has not been taxed - gets taxed to you

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4
Q

Who get what:

Cash Dividends
Interest Income
Rental Income and Expense
Property Taxes
Insurance premiums
Depreciation
Muni Bond Interest
Assets
Proceeds from Sale of corpus
Capital Gains and losses
Stock Dividends
Mortgage premiums
Capital Improvements
Insurance proceeds
A 
INCOME: Cash Dividends
INCOME: Interest Income
INCOME: Rental Income and Expense
INCOME:Property Taxes
INCOME:Insurance premiums
INCOME:Depreciation
INCOME:Muni Bond Interest
REMAINDER: Assets
REMAINDER: Proceeds from Sale of corpus
REMAINDER: Capital Gains and losses
REMAINDER: Stock Dividends
REMAINDER: Mortgage premiums
REMAINDER: Capital Improvements
REMAINDER: Insurance proceeds
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5
Q

Do you have to have a successor trustee

A

NO - they do not have to be designated

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6
Q

What is a grantor trust

A

This is a revocable trust . For tax purposes - NOT a Valid rust so all money is on the Creators return, not on the trust tax return

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7
Q

What is a living Trust

A

Set Up While you are Alive and immediately becomes effective

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8
Q

What is a Simple Trust

A
  • must distribute all annual income to the beneficiaries
  • No charity
  • Income from trust is taxable to recipient (K1)
    but the corpus holds the Principle

-Capital Gains also stay in the trust and become part of the corpus

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9
Q

Complex Trust

A

1) Retains income in the trust
2) distributes Corpus
3) charity

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10
Q

For an estate the initial tax period is calculated how

A

The estate can select a calendar year or fiscal year that begins on the date of their death

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11
Q

What is the unified rate schedule

A

lifetime taxable gifts and transfers at death are taxed on a cumulative basis

This is when taxable gifts and taxable estate at the time of death are put together. Then you subtract the lifetime unified transfer tax credit ( 5,4M) Then you pay taxes on the amount above it

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12
Q

When are life insurance policies INCLUDED in a persons estate - 2 conditions

A

1) the proceeds are paid directly to the estate
2) the descendant owns the policy and the ability to rename the beneficiary

ALL other times the policy is EXCLUDED from the gross estate

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13
Q

What does it mean when a husband and wife split monetary gifts

A

This means you can give up to 1 individual the amount allowed to the husband and wife - so 15 + 15 = 30 per individual

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14
Q

What is the unified Tax credit

A

This is the amount you can gift during your lifetime before any estate tax kicks in 10M

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15
Q

What is a marital deduction an dhow does it work

A

This is applied to an estate to reduce the amount subject to estate tax

It is the amount that is bequeathed to a surviving spouse

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16
Q

What do you file if you die and you made lifetime gifts that would normally go on a 709

A

In the year you die you do NOT need to file a 709

Instead any taxable gifts given in that year will go on their 706 if they are more than their lifetime exclusion

17
Q

How do you value assets sold before and after the AVD when you select the AVD

A

AVD is 6 months after death. The valuation is applied to all assets remaining in the estate at that time

If any were sold before that date - they are valued at their sales price

18
Q

What are valid deductions from a decedents gross estate

A 
charity
marital deductions funeral
medical
mortgages
casualty losses
state death taxes
19
Q

what is the exemption for simple trust

A

300 EXEMPTION - no standard deduction

20
Q

What is the exemption for a complex trust

A

100 EXEMPTION not standard deduction

21
Q

What is the exemption for an Estate or trust - also called a fiduciary income tax return

A

600 EXEMPTION - not standard deduction

22
Q

What is joint tenancy

A

This is the ownership of property by two or more people with each having an undivided interest in eh property

This means that upon the death of one - the share goes directly to the other joint tenant - not the deceased estate

23
Q

When you five a gift to child in the furture what is taxable

A

Only present interest ( immediately can be used) will qualify for the annual exclusion (15K)

The gift is a future gift and therefore fully taxable

24
Q

Does it matter if money is included in a fiduciary income tax return when you calculate the gross estate

A

No - income from a decedent is includable in the estate regardless of whether it was also on there income tax return

25
Q

What is income n respect to the descendent

A

ncome in respect of a decedent is income that is paid into a decedent’s estate that was earned by the decedent prior to the date of death and would have been included in the decedent’s taxable income if it had been paid prior to death.

26
Q

Gift or not?

Transfer to spouses

A

No a gift - not need for gift tax return

27
Q

Gift or not?

Transfer to charitable org

A

Not a gift - no return needed

28
Q

Gift or not:

political contribution

A

Not a gift - no need for a gift tax return

29
Q

Gift or not: payment of medical expenses

A

Not a gift - no need for a gift tax return

30
Q

Gift or not: payment of tuition for another

A

Not a gift - no need for a gift tax return

31
Q

Gift or not: Payment ot a university for a cousins room an board

A

a Gift - need for a gift tax return

32
Q

What are the rules of portability of a deceased spouses unused lifetime exclusion amount

A

Thi sis when the surviving spouse is able to still take advantage if any unused portion of their dead spouses unified estate and gift tax credit

In order to do so - the estate must file a 706 form,

The credit is applied to gifts given during the surviving spouses lifetime

33
Q

Do estate and trustshave to use a calendar year

A

An estate initial tax period can be either the calendar year or a fiscal year beginning on the date of death

Trusts that re subject to income tax are required to use a calendar year

34
Q

What must a trust have to be considered simple

A

It must distribute ALL its income to the beneficiaries each year

No charity

Can distribute the corpus ( includes capital gains

35
Q

can a trust be simple in some years and complex in orders

A

yes it can

36
Q

What are the rules for charity deductions

A
  • must be to a qualified charity
  • can be from gross income or permanently set aside funds for such contributions
  • it need sot be specifically stated in eh will to do this
37
Q

Is a trust able to deduct commissions for the purchase of assets that produce tax exempt income

A

No - no tax payer can because it is tax exempt

38
Q

when can you claim deductions for admin expenses by the fiduciary of an estate

A

Administrative expenses of an estate can be deducted in arriving at the net taxable estate on the estate tax return; may be claimed as a deduction on the estate (fiduciary) income tax return; or may be allocated between the two returns, as long as the same expense deduction is not duplicated on both returns.

Thus, any expense claimed on the fiduciary income tax return requires that the available deduction on the federal estate tax return be waived.

REG (31 decks)

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