M6-Trusts and Estates Flashcards
The amount of income an estate beneficiary reports from the estate is limited by the estate’s distributable net income. (true or false)
true
A trust’s distributable net income includes the taxable income of the trust. By definition, it does not include the net long-term capital gains allocated to corpus (just an example in a question.)
Distributable net income is the upper limit on the amount of income that a beneficiary has to include in income from a trust distribution. (true or false)
true
If the proper wavier is filed, medical expenses paid for the decedent by his/her executor within one year of his/her death can be deducted on the decedent’s final income tax return. (true or false)
true
Whats the difference between complex and simple trusts?
Complex trusts may accumulate current income, distribute principal, and provide for charitable contributions.
Simple trusts may only make distributions from current income (not corpus, or principal), must distribute all income currently, and may not make charitable contributions.
Either trust may have more than one beneficiary, have a grantor that is not an individual, or have beneficiaries that are not individuals.
A grantor trust requires that a person transfer property to a trust and retain certain powers over the trust (or treat the trust as being owned by the transferor for income tax purposes). (true or false)
true
An exemption of $____ is available for simple trusts.
$300
A fiduciary must file a return on Form 1041 if the estate has gross income of $600 or more for the tax year and if none of the beneficiaries are nonresident aliens. (true or false)
True
Estates are allowed an unlimited charitable deduction for amounts that are paid to recognized charities out of gross income under the terms of the governing instrument during the tax year. (true or false)
true
The charitable contribution deduction on an estates fiduciary income tax return is allowable only if the decedent’s will specifically provides for the contribution.
An estate or trust (is or is not) allowed a standard deduction in preparing the fiduciary income tax return?
Is NOT
An estate may choose the same accounting period as the decedent, or it may choose a calendar year or any fiscal year it wishes, with a few limited exceptions. (true or false)
true
Trusts (except tax-exempt trusts) must adopt a calendar year. (true or false)
true
Absent written provisions to the contrary, capital gains and losses are classified as principal and must remain with the estate or trust (i.e., allocated to corpus) to be taxed at the estate or trust level. (true or false)
true
Administration expenses paid by the fiduciary of an estate are deductible on the “fiduciary income tax return” only if the estate tax deduction is waived for those expenses. (true or false)
true
To deduct administration expenses, a statement must be filed with the income tax return stating that those deduction have not been taken on the decedent’s estate tax return.
An estate may elect either a calendar year or a fiscal year for the estate income tax return. (true or false)
true
Note: trusts with limited exceptions, must use a calendar year end.
Income earned by the grantor trust is taxable to the grantor since he/she retained discretionary power to receive the taxable income from the trust. (true or false)
True
