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Flashcards in Estate Trust Taxation Deck (24)
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1
Q
How is Gift taxation different from Estate taxation?
A
Property transferred while taxpayer is living
2
Q
What is the annual exclusion amount for a taxpayer's Gift taxation? What is required to get the exclusion?
A
$14,000 per year per spouse to each individual

In order to get the exclusion, the recipient must immediately acquire a present interest in the property and get unrestricted access to the property and all of its benefits
3
Q
If a Gift is an annuity, what value is used for the Gift?
A
If the Gift is an annuity, use Present Value to determine the gross Gift
4
Q
What is the basic Gift tax calculation?
A
Gross Gifts
- 1/2 of Gifts (treated as given by spouse)
- Total # of donees x $14,000 exclusion
= Taxable Gift
5
Q
How is a Gift taxed if a recipient gains a future ownership in the Gifted property?
A
Recipient must gain ownership and all rights to property to get the annual exclusion. If recipient merely gains a future ownership, then the present value of the Gift is 100% taxable to donor and cannot exclude from Gift tax calc
6
Q
What are the deductions for Gift tax, besides the annual exclusion?
A
Tuition and medical expenses paid directly to the provider organization (note: NOT books or dorm fees)

Political contributions

Charitable Gifts

Unlimited Gifts to spouse
7
Q
What is the basis of Gifted property for the recipient?
A
If a loss on sale, basis is FMV on the date of the Gift

If a gain on sale, basis is same as donor's basis

No G/L if donor basis is less than sales price, and sales price is less than FMV @ Gift date
8
Q
How/when are Gift tax returns filed?
A
Calendar-year basis only

Due April 15
9
Q
What are the basic characteristics of complex Trust?
A
Income distributions are optional
Accumulation of income ok
Charitable contributions ok
Contributions using tax-exempt income are not deductible
Allowed personal exemption of $100

Key Point: Distribution of Trust corpus (principal) ok
10
Q
What are the basic characteristics of a Simple Trust?
A
Income distributions mandatory

Accumulation of income disallowed

No charitable contributions

Distribution of Trust corpus DISALLOWED

Allowed personal exemption of $300
11
Q
How are Net Operating Losses handled in a Trust?
A
Trusts can have a Net Operating Loss

Any unused NOL flows through to the beneficiaries
12
Q
How are expenses and fees related to tax-exempt income handled in a Trust?
A
Expenses and fees from tax-exempt income are not deductible for either a Complex or Simple Trust
13
Q
When is property transferred in an Estate?
A
After the death of the donor
14
Q
What amount of a decedent's Estate is exempt from Estate Tax?
A
The First $5,250,000 is exempt with a 40% tax on amount above that
15
Q
How are a decedent's medical expenses handled with respect to an Estate?
A
Medical expenses paid after death, but incurred within 1 year of death go on decedents personal tax return
16
Q
How is an Estate's NOL handled?
A
Estates can have a Net Operating Loss

Any unused NOL flows through to the beneficiaries
17
Q
What does a gross Estate consist of?
A
Cash and Property FMV at death, or alternate valuation.
18
Q
What is joint tenancy with respect to an Estate? How is it calculated?
A
When two non-spouses jointly own property

FMV at death X % Ownership = Amount in Estate
19
Q
What is tenancy by entirety?
A
1/2 of marital assets go to deceased spouses Estate
20
Q
What is tenancy in common in an Estate?
A
A, B, and C own property

If A dies, FMV of As share goes to heirs
21
Q
How is Estate tax handled with respect to a beneficiary?
A
Property received through inheritance not income to recipient

Property value is FMV at date of death or 6 months later

If property is sold prior to 6 month date and the alternative date is used, FMV at date of sale is used to value property

Basis in property automatically assumes LT holding period
22
Q
What is distributable net income (DNI)?
A
DNI = Taxable Income Expenses (from income production)

Trust beneficiaries only pay tax if earnings are distributed

Estate beneficiaries pay tax on DNI, regardless if distributed
23
Q
When must a tax exempt organization file a 990-T for Unrelated Business Income?
A
If a tax exempt organization has more than $1,000 of UBI, it must file a Form 990-T
24
Q
What are the requirements for a 501(c)3 organization?
A
Organized and Operated exclusively for exempt purposes

No earnings can benefit an individual or private shareholder

Cant attempt to influence legislation as a major part of its activities

Cant campaign politically