Chapter 5 - Estate, Trust & Gift Taxes Flashcards Preview

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Flashcards in Chapter 5 - Estate, Trust & Gift Taxes Deck (10)
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1
Q

Remainder Beneficiaries

A
  • BS items:
    • original property
    • bonds (accrued interest)
    • Capital gains
    • mortgage principal payments
    • stock div./splits
    • insurance proceeds
    • capital improvements
2
Q

Income beneficiaries

A
  • Income statement items
    • rental income/expense
    • interest/div. income
    • cash div.
    • mortgage interest payments
    • property taxes
    • royalty income
    • depreciation
    • muni interest
    • insurance premiums
3
Q

Trusts are irrevocable unless:

A
  • reserve rights
  • end of term
  • occurrence of an event (death)
  • purpose accomplished
  • consent of truster & all beneficiaries, remaindermand and courts
4
Q

Trust (def and due dates)

A
  • Def: established for the purpose of benefiting specific individuals or charities without giving them current control of principal (corpus) of the trust
  • calendar year taxpayer and due 4/15
  • must pay quarterly estimated taxes
5
Q

Estates

A
  • def: estates are created at the time of a person’s death to temp hold the property of the decedent until it can be distributed to the heirs
  • fiscal year or calendar year is acceptable, usually starting on the decedent’s date of death.
    • return is due 3.5 months after the close of the reporting year.
  • estimated quarterly payment are not required for the first 2 years but are required after.
  • personal exemption = $600
6
Q

simple trust

A
  • one that makes annual distributions exactly equal to DNI (distributable Net income) to beneficiaries each year
  • form 1041 must be prepared every year
  • personal exemption is $300
  • distributions may exceed DNI
    • only amount up to DNI is included in gross income
      *
7
Q

Complex trust

A
  • any trust that fails to meet simple trust and satisfies of on the following:
    • distributions are less than DNI
    • amounts are permanently set aside for charitable gifts
    • distribution was made from amounts allocated to trust principal
    • personal exemption = $100
8
Q

Distributable net income (DNI)

A
  • max amount that can be taxed to the beneficiary, the rest is tax free distribution of capital
  • diff. from taxable income
    • includes tax exempt income
    • less Net capital gains
9
Q

Gift Tax return (form 709)

A
  • transfers made during lifetime are reported on 709 and the estates tax return (form 706) combines all reported gift taxes an the value of the estate at death to determine if any additional taxes are due.
  • reported on present interest more than $14000.
    • Exlclusons:
      • gifts to spouses
        • and contemplation of marriage (wedding ring)
      • support minors
      • payment directly to schools for tuition for another
        • full time student and in US.
      • directly to health providers for another
      • deposting cash into joing bank account
  • Gift of future interest must be reported regardless of size.
  • Due date: april 15
  • up to $5,430,000 for single
10
Q
A