ITX - 36 Flashcards

(37 cards)

1
Q

Trusts are created when a ___ transfers assets to a ___ on behalf of specified ___.

A

grantor
trustee
beneficiaries

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2
Q

Trusts and estates must file a return if they have more than $___ in gross income for the tax year.

A

$600

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3
Q

When must a trust file a tax return?

A

When it has any taxable income for the year

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4
Q

A taxable trust and estates file Form ___ to report income and distributions to beneficiaries. The due date is ___. Is an automatic 6-month extension available?

A
  • Form 1041
  • The 15th day of the fourth month following the end of the entity’s tax year
  • Yes
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5
Q

Trusts must use a ___ year unless they are tax-exempt, charitable, or a grantor trust.

A

calendar

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6
Q

Estates may use __ year.

A

Either a calendar or a fiscal year

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7
Q

The income of a trust or estate is taxed to the beneficiaries if it is ___, and it is taxed to the trust if it is ___.

A
  • distributed

- retained

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8
Q

The income of a trust or estate is taxed to the ___ if it is distributed, and it is taxed to the ___ if it is retained.

A
  • beneficiaries

- trust

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9
Q

Trusts and Estates: Beneficiaries are taxed on the amount that is ___ even if it is not actually distributed.

A

required to be distributed

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10
Q

Capital gains and interest income required to be distributed to beneficiaries are taxed as ___ to the beneficiaries.

A

capital gains and interest

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11
Q

Income retained and taxable to the trust or estate:

15%

A

$0 - $2,500

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12
Q

Income retained and taxable to the trust or estate:

25%

A

$2,501 - $5,800

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13
Q

Income retained and taxable to the trust or estate:

28%

A

$5,801 - $8,900

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14
Q

Income retained and taxable to the trust or estate:

33%

A

$8,901 - $12,150

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15
Q

Income retained and taxable to the trust or estate:

39.6%

A

Over $12,150

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16
Q

Trust income in a grantor trust will be taxed to the ___.

17
Q

When a grantor creates a trust and retains certain powers or control over the trust, the trust is considered a ___ trust, and the trust income will be taxed to the grantor.

18
Q

The grantor trust rules require the grantor to report ___ income as though the grantor still owned the trust assets. These rules do not require inclusion of trust assets in the grantor’s ___ estate.

19
Q

A trust is not considered reversionary if the grantor’s interest is ___% or less at the time the trust is funded. The trust will be reversionary unless it has a duration of approximately ___ years. However, if the grantor’s reversionary interest exceeds ___%, income tax liability arises.

20
Q

Grantor trusts do not report income and deductions on Form 1041; rather, all income and deductions are reported on ___.

A

the grantor’s Form 1040

21
Q

___ trusts are required to distribute all of their accounting income to beneficiaries.

22
Q

___ trusts cannot make charitable contributions and cannot make distributions in excess of current accounting income (no principle).

23
Q

Investment expenses incurred specifically for a simple trust’s operation are deductible, without being subject to the __% AGI floor.

24
Q

A simple trust has a standard deduction of $__ and a personal exemption of $___.

25
___ trusts can accumulate income, make charitable contributions, and distribute principal to beneficiaries.
Complex
26
A complex trust has a standard deduction of $___ and a personal exemption of $___.
$0 | $100
27
A ___ trust provides that the trust can be revoked or changed by the grantor at any time.
revocable
28
A revocable trust must be a ___ trust because the grantor must be alive in order to exercise the power to revoke or amend the trust.
living, or inter vivos
29
A trust's taxable income is determined by taking ___ income and subtracting a trust's ___ for distributions.
taxable | deduction
30
A trust's deduction for distributions cannot exceed its ___.
distributable net income (DNI)
31
Distributable net income (DNI) includes ___ gains, to the extent included in accounting income, and ignores ___ losses, unless used to offset ___ gains. DNI also includes ___ income.
- capital - capital - capital - tax- exempt
32
Income distribution deduction (IDD) does not include any ___ income, as the ___ income is not part of the trust's taxable income. The IDD does not include capital gains, as capital gains are typically taxed to the ___.
- tax-exempt income - tax-exempt income - trust
33
Complex trust: Interest and dividends are all distributed, but __ income is retained.
rental
34
A complex trust can deduct actual distributions made, up to ___ days after the end of the trust's tax year, subject to the distributable net income (DNI) ceiling.
65
35
A trust avoids double taxation on ___ because there is a deduction for any income that is actually distributed to beneficiaries.
DNI (distributable net income)
36
The trust files a return, reporting the income that it ___, and the beneficiary files a tax return, reporting the income ___ or ___ from the trust.
- retains - received - payable
37
Estate: personal exemption
$600