R4 - Estate, Trust, and Gift Tax

Question 1

The amount of income an estate beneficiary reports from the estate is:

Answer 1

Limited by the estate’s distributable net income.

Question 2

In determining the amount of gifts made in a calendar year, the donor may exclude the first ___________ of gifts made to each donee.

Answer 2

$14,000

Question 3

If the proper waiver is filed, medical expenses paid for the decedent by her executor within one year of her death can be deducted where?

Answer 3

On the decedent’s final income tax return.

Question 4

The maximum amount that can be transferred pursuant to a death tax-free is:

Answer 4

$5,340,000 (during 2014)

Question 5

Complex trusts may:

Answer 5

Accumulate current income, distribute principal, and provide for charitable contributions.

Question 6

Simple trusts may only:

Answer 6

Make distributions from current income (not corpus, or principal), must distribute all income currently, and may not make charitable contributions.

Question 7

An exemption of $_______ is available for simple trusts.

Answer 7

$300

Question 8

If a revocable trust is created by a grantor, the trust assets:

Answer 8

May be returned to the grantor upon the grantor’s “revocation” of the trust; thus, the assets never left the control (or possible ownership) of the grantor and remain includible in the gross estate of the grantor.

Question 9

Income distribution deduction =

Answer 9

Lesser of Actual distribution to beneficiary, or Distributable Net Income (DNI).

Question 10

Income in respect of a decedent covers:

Answer 10

Income earned before the taxpayer’s death but not collected until after death.

Question 11

A fiduciary must file a return on Form 1041 if the estate has gross income of:

Answer 11

$600 or more for the tax year and if none of the beneficiaries are nonresident aliens.

Question 12

The charitable contribution deduction on an estate’s fiduciary income tax return is allowable:

Answer 12

Only if the decedent’s will specifically provides for the contribution.

Question 13

When the creator is treated as the owner of a trust, it is referred to as:

Answer 13

A grantor trust.

Question 14

De minimus rule:

Answer 14

Must have a capitalization policy in place; if company has an applicable financial statement, the maximum amount for deduction is $5,000 ($500 if no applicable financial statement in place).