Trust & Estates

Question 1

Types of Tax for Estates

Answer 1

1) income tax: due annualy based on income earned during the year while the state is in existence
2) estate tax: one time only transfer tax based on the value of the decendent’s estate (taxed to estate before transferred)

Question 2

What is distributable net income (DNI)

Answer 2

a limitation on the amount the trust or estate can deduct with respect to distributions to beneficiaries

Question 3

general calc of DNI

Answer 3

estate (trust) gross income (include cap gains)
- estate/trust deductions
= adjusted total incomr
\+ adjusted tax-exempt interest
- capital gains (attribd to corpus)
=DNI

Question 4

The income distribution deduction equals

Answer 4

the lessor of:

1) actual distibution

or

2) DNI (less adjusted tax-exempt interest)

Question 5

Rules for estimated payments involving estates

Answer 5

not required to make for its first two years

Question 6

Trust vs estate year ends

Answer 6

Trust- only Year end- 12/31

estates- anytime

Question 7

Rules of simple trust

Answer 7

• can only make distribs our of current income not principal
• required to distrib all of its income currently
• cannot make charitable contrib deduction
• entiteld to 300 dollar exemption in arriving at taxable income

Question 8

rules of complex trust

Answer 8

• may accumulate current income
• may distrib principle
• may deduct charitable contribs
• permitted exemption of 100 dollars

Question 9

Ordinary and necessary admin exps paid by the fiduciary of an estate are deductable…

Answer 9

On the fidicuiary income tax return only if the estate tax deduction is waived for these expenses