ITX - 36 Flashcards Preview

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Flashcards in ITX - 36 Deck (37)
1

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

grantor
trustee
beneficiaries

2

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

$600

3

When must a trust file a tax return?

When it has any taxable income for the year

4

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?

- Form 1041
- The 15th day of the fourth month following the end of the entity's tax year
- Yes

5

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

calendar

6

Estates may use __ year.

Either a calendar or a fiscal year

7

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 ___.

- distributed
- retained

8

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.

- beneficiaries
- trust

9

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

required to be distributed

10

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

capital gains and interest

11

Income retained and taxable to the trust or estate:
15%

$0 - $2,500

12

Income retained and taxable to the trust or estate:
25%

$2,501 - $5,800

13

Income retained and taxable to the trust or estate:
28%

$5,801 - $8,900

14

Income retained and taxable to the trust or estate:
33%

$8,901 - $12,150

15

Income retained and taxable to the trust or estate:
39.6%

Over $12,150

16

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

grantor

17

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.

grantor

18

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.

trust
gross

19

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.

- 5%
- 43
- 5%

20

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

the grantor's Form 1040

21

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

Simple

22

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

Simple

23

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

2%

24

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

$0
$300

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