R6-M1 Trusts and Gifts

Question 1

what are trusts?

Answer 1

trusts are separate income tax paying entities and distributions made by these entities are deductible by the entity yet taxable to the recipient

Question 2

what are simple trusts?

Answer 2

• only make distributions out of the current income. cannot make distributions from the trust corpus (principal)
• is required to distribute all of its income currently
• cannot take a deduction for a charitable contribution
• is entitled to a $300 exemption

Question 3

what are complex trusts?

Answer 3

• may accumulate current income
• may distribute principal
• may deduct charitable contribution
• exemption is $100

Question 4

what are rules of gift taxes?

Answer 4

• a gift is present and complete
• tax is paid by the person giving the gift. per person, per year and to anyone
• annual exemption $17k (2023) per person.
• ## unlimited exclusion if paying directly to educational institution, health care provider for medical care, charitable gifts, and marital deduction

Question 5

what are future interest gifts?

Answer 5

• gifts will be distributed at some future date
• a future interest gift does not qualified for either a deduction or the annual exclusion from gift tax

Question 6

what are present interest gifts?

Answer 6

• governing instrument provides that the specific sum of income is to be accumulated in the trust and not paid at least annually
• annual exclusion applies