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Flashcards in Trusts and Estates Deck (18):
1

Working out the Distribution Deduction - NO tax exempt or cap gains
Distributable (taxable) Net Income: Doesn't include tax exempt interest
Required Distribution: Everything but capital GAins

Expenses attributable to Interest Income: Must be allocated to exempt/nonexempt

Trustee Commission: Allocated to tax exempt/captal gains/(dividends and interest)

Required (Gross)Distribution: All investment income before netting out expenses (not CApital gains)

Distributable (taxable) Net Income: Net of tax exempt interest and capital gains

Distribution Deduction: Lesser of the Required Distribution or DNI

2

Forget the lesser of nonsense for the distribution deduction being the lesser of the required distribution or the distributable net income. And it's actually should be called Distributable Taxable Net Income.

The DTNI is All the taxable income from non-capital gain transactions less a proportion of the investment expenses.

Allocation:
Trustee Commissions for Production of Income: Allocated among everything
Interest is just taxable/non-taxable

Not sure where the commissions attributable to cap gain ends up on the tax return, but anyway

3

Taxable Distribution Deduction: Meaning what is the taxable income after expenses that can be distributed.
Add everything taxable that can be distributed
Interest 80
Dividends 30

Now figure out the allocation of expenses to taxable interest versus non-taxavle interest
Tax Exempt Interest 20 + Taxable 80 = 100 taxable = 80% of Expenses 5000 = 4000
deductible fees

Now figure out allocation of expenses to (net distributable interest income) + dividends distributable + capital gain income. (100-5) + 30 +25 = 150. How much is due to the cap gains 25/150 = 17%. and the rest 83% is attributable to the distributable income (both taxable and non-taxable) which is $12,450.

So I would take 80+301-12,450 =

4

Where are the administration expenses (and debts of a decedent - as in the one who is deceased) deducted.

The estate return
The estate's income tax return 1041

On the state return
Though you can file a form to get a waiver and deduct them on the estates income tax return

Teh estate tax return is for the estate tax
The estate income tax return form1041 is for the income earned by the estate

5

For A TRUST ACCOUNTING INCOME IS WHAT?

IT'S JUST THE INCOME AMOUNTS THAT AREN'T ALLOCABLE TO CORPUS AND BEFORE ANY ALLOCATION OF EXPENSES

So Dividends, Taxable Interest, Non-taxable interest

no expenses

6

For medical expense gifts and tuition gifts, they can be unlimited provided what?

They are paid to the hospital or the school

7

What Section of the IRS code deals with estates trusts beneficiaries

What Section Deals with Estates

TCP Title 26
Sub-Title A Income Taxes
Chapter 1 - Normal Taxes and Surcharges
Sub-Chapter - J Estates Trusts Beneficiaries

Sub-Title B: Estate and Gift Taxes

8

What section of the IRS code deals with the gift tax

Sub-Title B: Estate and Gift Tqaxes
Chapter 12: Gift Tax

9

For gifts, what do you use FMV or the basis.

The FMV I would think the basis?

10

If you deed half your personal residence to your daughter is that a gift?

If you set up a bank account with someone is that a gift?

Yes, half is a gift.
Not a gift until they draw money out.

11

If you sell your business for %75,000 less than MV is that a gift?

Yes

12

2015 gift tax exclusion is

2,117,800

13

Are life insurance proceeds includible in gross estate
How about reportable on estate income tax return

Are always included in gross instate
No = I don't think they are taxable

14

How high do your assets have to be for you to file an estate tax return.

5.43 million

15

A resulting trust is formed when what
HOw is it different from a cy pres trust

Express purpose fails
fullfillment of trust purpose

I guess because there's still money left in the latter
Notice it's not a new trust
Cy Pres doctrine - Replace the original charity with a comparable charity but doesn't create a new trust, honestly what a bunch of horse shit, how would you possibly distinguish that

16

Constructive Trust happens when

When there's illegal holding of some property and the person who shouldn't be holding it forms a trust

17

Resulting Trust is what

REsults from failure of original trust - it's a new trust

18

Can a partnership designated as a tax shelter use the cash method?
Can an international accounting firm.

No
Yes, anything that's personal service corps can use cash it looks like.