Advanced Federal Taxation
Exam Answer Key
Course Introduction
Advanced Federal Taxation delves into the complex principles and regulations governing federal taxation in the United States, with a focus on individual, partnership, and corporate tax issues. The course explores advanced topics such as tax planning strategies, alternative minimum tax, taxation of entities and their owners, multi-state taxation, and federal tax research methods. Students will engage in the analysis of tax laws, case studies, and applied problem-solving to understand the implications of federal tax policies on various business and personal financial decisions. Emphasis is placed on current trends, compliance requirements, and ethical considerations in federal taxation.
Recommended Textbook
South Western Federal Taxation 2016 Comprehensive 39th Edition by William H. Hoffman
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4028 Flashcards
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Chapter 1: An Introduction to Taxation and Understanding the Tax Law
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Q1) Which,if any,of the following statements best describes the history of the Federal income tax?
A)It did not exist during the Civil War.
B)The Federal income tax on corporations was held by the U.S.Supreme Court to be allowable under the U.S.Constitution.
C)The Federal income tax on individuals was held by the U.S.Supreme Court to be allowable under the U.S.Constitution.
D)Both the Federal income tax on individuals and on corporations was held by the U.S.Supreme Court to be contrary to the U.S.Constitution.
E)None of these.
Answer: B
Q2) A fixture will be subject to the ad valorem tax on personalty rather than the ad valorem tax on realty.
A)True
B)False
Answer: False
Q3) A deduction for certain income from manufacturing activities.
Answer: a
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Chapter 2: Working With the Tax Law
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Q1) Which court decision would probably carry more weight?
A)Regular U.S.Tax Court decision
B)Reviewed U.S.Tax Court decision
C)U.S.District Court decision
D)Tax Court Memorandum decision
E)U.S.Court of Federal Claims
Answer: B
Q2) The Index to Federal Tax Articles (published by Warren,Gorham,and Lamont) is available in print and electronic formats.
A)True
B)False
Answer: False
Q3) Determination letters usually involve finalized transactions.
A)True
B)False
Answer: True
Q4) Rules of tax law do not include Revenue Rulings and Revenue Procedures.
A)True
B)False
Answer: False
Page 4
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Chapter 3: Computing the Tax
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Q1) Lena is 66 years of age,single,and blind and is not claimed as a dependent.How much gross income must she have before she is required to file a Federal income tax return for 2015?
Answer: $11,850.$6,300 (basic standard deduction) + $1,550 (additional standard deduction for age) + $4,000 (personal exemption).Note that the additional standard deduction for blindness does not come into play in determining the gross income required for filing a tax return.
Q2) Lee,a citizen of Korea,is a resident of the U.S.Any rent income Lee receives from land he owns in Korea is not subject to the U.S.income tax.
A)True
B)False
Answer: False
Q3) Abandoned spouse
Answer: e
Q4) When separate income tax returns are filed by married taxpayers,one spouse cannot claim the other spouse as an exemption.
A)True
B)False Answer: False
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Chapter 4: Gross Income: Concepts and Inclusions
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Q1) Freddy purchased a certificate of deposit for $20,000 on July 1,2015.The certificate's maturity value in two years (June 30,2017) is $21,218,yielding 3% before-tax interest.
A)Freddy must recognize $1,218 gross income in 2015.
B)Freddy must recognize $1,218 gross income in 2017.
C)Freddy must recognize $600 (.03 × $20,000) gross income in 2017.
D)Freddy must recognize $300 (.03 × $20,000 × .5) gross income in 2015.
E)None of these.
Q2) Sarah,a widow,is retired and receives $20,000 interest income and dividends and $10,000 in Social Security benefits.Sarah is considering selling a stock at an $8,000 gain.What will be the increase in Sarah's gross income as a result of the sale of the stock?
Q3) In the case of a gift loan of less than $100,000,the imputed interest rules apply if the donee has net investment income of over $1,000.
A)True B)False
Q4) How does the taxation of Social Security benefits differ from the taxation of an annuity purchased by the taxpayer?
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6
Chapter 5: Gross Income: Exclusions
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Q1) Mia participated in a qualified state tuition program for the benefit of her son Michael.She contributed $15,000.When Michael entered college,the balance in the fund satisfied the tuition charge of $20,000.When the funds were withdrawn to pay the college tuition for Michael,neither Mia nor Michael must include $5,000 ($20,000 - $15,000) in gross income.
A)True
B)False
Q2) Jack received a court award in a civil libel and slander suit against National Gossip.He received $120,000 for damages to his professional reputation,$100,000 for damages to his personal reputation,and $50,000 in punitive damages.Jack must include in his gross income as a damage award:
A)$0.
B)$100,000.
C)$120,000.
D)$270,000.
E)None of these.
Q3) If a tax-exempt bond will yield approximately .65 (1 - .35) times the yield on a taxable bond of equal risk,who benefits from the tax exemption: the Federal government,the state and local governments who issue the bonds,or the investors?
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Page 7
Chapter 6: Deductions and Losses: in General
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Q1) LD Partnership,a cash basis taxpayer,purchases land and a building for $200,000 with $150,000 of the cost being allocated to the building.The gross receipts of the partnership are less than $100,000.LD must capitalize the $50,000 paid for the land,but can deduct the $150,000 paid for the building in the current tax year.
A)True
B)False
Q2) Priscella pursued a hobby of making bedspreads in her spare time.Her AGI before considering the hobby is $40,000.During the year she sold the bedspreads for $10,000.She incurred expenses as follows: Supplies $4,000 Interest on loan to get business started 500 Advertising 6,500 Assuming that the activity is deemed a hobby,how should she report these items on her tax return?
A)Include $10,000 in income and deduct $11,000 for AGI.
B)Ignore both income and expenses since hobby losses are disallowed.
C)Include $10,000 in income,deduct nothing for AGI,and claim $11,000 of the expenses as itemized deductions.
D)Include $10,000 in income and deduct interest of $500 for AGI.
E)None of the above.
Q3) Are there any circumstances under which lobbying expenditures are deductible?
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8
Chapter 7: Deductions and Losses: Certain Business
Expenses and Losses
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Q1) Last year,Amos had AGI of $50,000.Amos also had a diamond ring stolen which cost $20,000 and was worth $17,000 at the time of the theft.He itemized deductions on last year's tax return.In the current year,Amos recovered $17,000 from the insurance company.Therefore,he must include $11,900 in gross income on the tax return for the current year.
A)True
B)False
Q2) The amount of a loss on insured personal use property is reduced by the insurance coverage if no claim is made against the insurer.
A)True
B)False
Q3) A theft loss is taken in the year of the theft.
A)True
B)False
Q4) The amount of partial worthlessness on a nonbusiness bad debt is deducted in the year partial worthlessness is determined.
A)True
B)False
Page 9
Q5) Why was the domestic production activities deduction (DPAD) enacted by Congress?
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Chapter 8: Depreciation, cost Recovery, amortization, and Depletion
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Q1) Property which is classified as personalty may be depreciated.
A)True
B)False
Q2) On June 1,2015,James places in service a new automobile that cost $40,000.The car is used 60% for business and 40% for personal use.(Assume this percentage is maintained for the life of the car. ) James does not take additional first-year depreciation (if available).Determine the cost recovery deduction for 2015.
A)$1,776
B)$1,896
C)$4,800
D)$8,000
E)None of the above
Q3) A purchased trademark is a § 197 intangible.
A)True
B)False
Q4) All personal property placed in service in 2015 and used in a trade or business qualifies for additional first-year depreciation.
A)True
B)False
10
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Chapter 9: Deductions: Employee and
Self-Employed-Related Expenses
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Q1) Allowing for the cutback adjustment (50% reduction for meals and entertainment),which of the following trips,if any,will qualify for the travel expense deduction?
A)Dr.Jones,a general dentist,attends a two-day seminar on developing a dental practice.
B)Dr.Brown,a surgeon,attends a two-day seminar on financial planning.
C)Paul,a romance language high school teacher,spends summer break in France,Portugal,and Spain improving his language skills.
D)Myrna went on a two-week vacation in Boston.While there,she visited her employer's home office to have lunch with former co-workers.
E)All of these.
Q2) Jana has $225,000 of earned income in 2015.Calculate the amount she can contribute to a SEP.
A)$22,500
B)$24,500
C)$53,000
D)$55,000
E)None of the above
Q3) Sue charges by the hour for her work.
Page 11
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Chapter 10: Deductions and Losses: Certain Itemized
Deductions
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Q1) Capital assets donated to a public charity that would result in long-term capital gain if sold,are subject to the 30%-of-AGI ceiling limitation on charitable contributions for individuals.
A)True
B)False
Q2) Leona borrows $100,000 from First National Bank and uses the proceeds to purchase City of Houston bonds.The interest Leona pays on this loan is deductible as investment interest subject to the investment interest limits.
A)True
B)False
Q3) Ronaldo contributed stock worth $12,000 to the Children's Protective Agency,a qualified charity.He acquired the stock 20 months ago for $6,000.He may deduct $6,000 as a charitable contribution deduction (subject to percentage limitations).
A)True
B)False
Q4) Linda borrowed $60,000 from her parents for a down payment on a condominium.She paid interest of $5,500 in 2013,$0 in 2014,and $9,000 in 2015.The IRS disallowed the deduction.Can you offer any explanation for the disallowance?
Page 12
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Chapter 11: Investor Losses
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Q1) Sandra acquired a passive activity three years ago.Until last year,the activity was profitable and her at-risk amount was $300,000.Last year,the activity produced a loss of $100,000,and in the current year,the loss is $50,000.Assuming Sandra has received no passive income in the current or prior years,her suspended passive loss from the activity is:
A)$90,000 from last year and $50,000 from the current year.
B)$100,000 from last year and $50,000 from the current year.
C)$0 from last year and $0 from the current year.
D)$50,000 from the current year.
E)None of the above.
Q2) Vail owns interests in a beauty salon,a natural foods store,and a tanning salon.Several full-time employees work at each of the enterprises.As of the end of November of the current year,Vail has worked 180 hours in the beauty salon,220 hours at the natural foods store,and 80 hours at the tanning salon.These three ventures collectively will produce income.Vail also owns one other passive activity that is producing a loss (a limited partnership in which she has reported no participation).How should Vail plan her activities for the remainder of the year?
Q3) Identify how the passive loss rules broadly classify various types of income and losses.Provide examples of each category.
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Page 13
Chapter 12: Tax Credits and Payments
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Q1) Several years ago,Sarah purchased a structure for $150,000 that was originally placed in service in 1929.In the current year,she incurred qualifying rehabilitation expenditures of $200,000.The amount of the tax credit for rehabilitation expenditures,and the amount by which the building's basis for cost recovery would increase as a result of the rehabilitation expenditures are the following amounts:
A)$20,000 credit,$180,000 basis.
B)$20,000 credit,$200,000 basis.
C)$20,000 credit,$350,000 basis.
D)$40,000 credit,$160,000 basis.
E)None of the above.
Q2) The American Opportunity credit is available per eligible student,while the lifetime learning credit is calculated per taxpayer.
A)True
B)False
Q3) For purposes of computing the credit for child and dependent care expenses,the qualifying employment-related expenses are limited to an individual's actual or deemed earned income.
A)True
B)False
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Page 14
Chapter 13: Property Transactions: Determination of Gain or
Loss, basis Considerations, and Nontaxabl
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Q1) Tara owns common stock in Taupe,Inc. ,with an adjusted basis of $250,000.She receives a preferred stock dividend which is nontaxable.
a.What effect does the preferred stock dividend have on Tara's adjusted basis of the common stock?
b.How is the basis of the preferred stock calculated?
c.What effect does the preferred stock dividend have on Tara's gross income?
Q2) The carryover basis to a donee for property received by gift can be an amount greater than the donor's adjusted basis.
A)True
B)False
Q3) Bud exchanges a business use machine with an adjusted basis of $22,000 and a fair market value of $30,000 for another business use machine with a fair market value of $28,000 and $2,000 cash.What is Bud's recognized gain or loss?
A)$0
B)$2,000
C)$6,000
D)$8,000
E)None of the above
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Chapter 14: Property Transactions: Capital Gains and
Losses, section 1231 and Recapture Provisions
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Q1) Recognized gains and losses from disposition of a capital asset may occur as a result of a:
A)Sale.
B)Exchange.
C)Casualty.
D)Condemnation.
E)All of the above.
Q2) Lana purchased for $1,410 a $2,000 bond when it was issued two years ago.Lana amortized $200 of the original issue discount and then sold the bond for $1,800.Which of the following statements is correct?
A)Lana has $10 of long-term capital loss.
B)Lana has $190 of long-term capital gain.
C)Lana has no capital gain or loss.
D)Lana has $190 of long-term capital loss.
E)None of the above.
Q3) Nonrecaptured § 1231 losses from the six prior tax years may cause current year net § 1231 gain to be treated as ordinary income.
A)True
B)False
Page 16
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Chapter 15: Alternative Minimum Tax
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Q1) If the regular income tax deduction for medical expenses is $0,under certain circumstances the AMT deduction for medical expenses can be greater than $0.
A)True
B)False
Q2) The required adjustment for AMT purposes for pollution control facilities placed in service in 2015 is equal to the difference between the amortization deduction allowed for regular income tax purposes and the depreciation deduction computed under ADS.
A)True
B)False
Q3) Cher sold undeveloped land that originally cost $150,000 for $225,000.There is a positive AMT adjustment of $75,000 associated with the sale of the land.
A)True
B)False
Q4) Why is there no AMT adjustment for charitable contributions?
Q5) What itemized deductions are allowed for both regular income tax purposes and for AMT purposes?
Q6) What is the relationship between taxable income and AMTI?
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Page 17
Chapter 16: Accounting Periods and Methods
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Q1) In 2015,Swan Company discovered that it had for the past 10 years capitalized as a production cost certain expenses that are properly classified as administrative expenses.The total amount of the expense for 2014 was $300,000,$60,000 of the item was included in the ending inventory that year and $240,000 was deducted as cost of goods sold.
A)The company should amend its 2014 tax return and reduce its income by $240,000.
B)The company should change its accounting method in 2015,with a $60,000 negative § 481 adjustment which decreases its 2015 taxable income.
C)The company should change its accounting method in 2015,and increase its 2015 income by $60,000,the amount of the positive § 481 adjustment to income.
D)The company should change its accounting method in 2015 and recognize a $60,000 negative § 481 adjustment that will be spread equally over 2015-18. E)None of the above.
Q2) The tax year of one of the principal partners may determine the partnership's tax year.
A)True B)False
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Page 18
Chapter 17: Corporations: Introduction and Operating Rules
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Q1) Hornbill Corporation,a cash basis and calendar year C corporation,was formed and began operations on May 1,2015.Hornbill incurred the following expenses during its first year of operations (May 1 - December 31,2015): temporary directors meeting expenses of $10,500,state of incorporation fee of $5,000,stock certificate printing expenses of $1,200,and legal fees for drafting corporate charter and bylaws of $7,500.Hornbill Corporation's current year deduction for organizational expenditures is $5,800.
A)True
B)False
Q2) Eagle Company,a partnership,had a short-term capital loss of $10,000 during the year.Aaron,who owns 25% of Eagle,will report $2,500 of Eagle's short-term capital loss on his individual tax return.
A)True
B)False
Q3) During the current year,Quartz Corporation (a calendar year C corporation) has the following transactions: Income from operations $350,000 Expenses from operations 370,000 Dividends received from ABC Corporation 50,000 Quartz owns 25% of ABC Corporation's stock.How much is Quartz Corporation's taxable income (loss) for the year?
Q4) Briefly discuss the requirements for the dividends received deduction.
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Chapter 18: Corporations: Organization and Capital Structure
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Q1) The transfer of an installment obligation in a transaction qualifying under § 351 is a disposition of the obligation that causes gain to be recognized by the transferor.
A)True
B)False
Q2) In order to retain the services of Eve,a key employee in Ted's sole proprietorship,Ted contracts with Eve to make her a 30% owner.Ted incorporates the business receiving in return 100% of the stock.Three days later,Ted transfers 30% of the stock to Eve.Under these circumstances,§ 351 will not apply to the incorporation of Ted's business.
A)True
B)False
Q3) Basis of appreciated property transferred minus boot received (including liabilities transferred) plus gain recognized equals basis of stock received in a § 351 transfer.
A)True
B)False
Q4) What is the rationale underlying the tax deferral treatment available under § 351?
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20
Chapter 19: Corporations: Distributions Not in Complete Liquidation
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Q1) The Code treats corporate distributions that are a return of a shareholder's investment as sales or exchanges and corporate distributions that are a return from a shareholder's investment as dividends.
A)True
B)False
Q2) In applying the § 318 stock attribution rules to a stock redemption,a shareholder is treated as owning the stock of her spouse,children,grandchildren,parents,and siblings.
A)True
B)False
Q3) Which of the following is not a consequence of the double tax on dividends?
A)Corporations have an incentive to retain earnings and structure distributions to avoid dividend treatment.
B)Corporations have an incentive to invest in noncorporate rather than corporate businesses.
C)The cost of capital for corporate investments is increased.
D)Corporations have an incentive to finance operations with debt rather than equity.
E)All of the above are consequences of the double tax on dividends.
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Page 21
Chapter 20: Corporations: Distributions in Complete
Liquidation and an Overview of Reorganizations
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Q1) During the current year,Ecru Corporation is liquidated and distributes its only asset,land,to Kena,the sole shareholder.On the date of distribution,the land has a basis of $250,000,a fair market value of $650,000,and is subject to a liability of $500,000.Kena,who takes the land subject to the liability,has a basis of $120,000 in the Ecru stock.With respect to the distribution of the land,which of the following statements is correct?
A)Kena recognizes a gain of $530,000.
B)Ecru Corporation recognizes a gain of $250,000.
C)Kena recognizes a gain of $30,000.
D)Kena has a basis of $250,000 in the land.
E)None of the above.
Q2) A subsidiary corporation is liquidated at a time when it is indebted to its parent corporation.The subsidiary corporation distributes property to the parent corporation in satisfaction of the indebtedness.If the liquidation is governed by § 332,neither the subsidiary nor the parent recognize gain or loss on the transfer of property in satisfaction of indebtedness.
A)True
B)False
Q3) Discuss the role of letter rulings in corporate reorganizations.
Page 22
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Chapter 21: Partnerships
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Q1) Separately stated item
Q2) The MOP Partnership is involved in construction activities.Patricia has an adjusted basis for her partnership interest on January 1 of the current year of $600,000,consisting of the following: Capital account $350,000 Share of partnership recourse debt 50,000 Share of partnership nonrecourse debt 200,000 $600,000 During the year,the partnership has an operating loss of $1.2 million and distributes $60,000 of cash to Patricia.Partnership liabilities were the same at the end of the tax year,and the nonrecourse debt is not "qualified nonrecourse debt." If she owns a 60% share of partnership profits,capital,and losses,and is an active ("material") participant in the partnership,how much of her share of the operating loss can Patricia deduct? What Code provisions could cause a suspension of the loss? How would your answer change if MOP were an LLC and Patricia had not personally guaranteed any of the debt?
Q3) Which of the following entity owners cannot participate in management of the entity?
A)A general partner in a general partnership.
B)A member of a limited liability company.
C)A partner in a limited liability partnership.
D)A limited partner in a limited liability limited partnership.
E)None of the above.
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Page 23
Chapter 22: S Corporations
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Q1) Distributions of appreciated property by an S corporation are not taxable to the entity.
A)True
B)False
Q2) Pepper,Inc. ,an S corporation in Norfolk,Virginia,has revenues of $400,000,taxable interest of $380,000,operating expenses of $250,000,and deductions attributable to the interest income of $140,000.Calculate any passive investment income penalty tax payable by this corporation.
Q3) Gene Grams is a 45% owner of a calendar year S corporation during 2015.His beginning stock basis is $230,000,and the S corporation reports the following items. Ordinary income $72,000 Short-term capital gain 16,000 § 1231 loss 6,000 Tax-exempt interest income 5,000 Calculate Grams's stock basis at year-end.
Q4) Alomar,a cash basis S corporation in Orlando,Florida,holds the following assets and liabilities on January 1,2015,the date the S election is made. Adjusted Basis Fair Market Value Cash $ 200,000 $ 200,000 Accounts receivable -0- 105,000 Equipment 110,000 100,000 Land 1,800,000 2,500,000 Accounts payable -0- 110,000 During 2015,Alomar collects the accounts receivable and pays the accounts payable.The land is sold for $3 million,and the taxable income for the year is $590,000.Calculate any built-in gains tax.
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Page 24
Chapter 23: Exempt Entities
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Q1) Define "trade or business" for purposes of the unrelated business income tax (UBIT).
Q2) Help,Inc. ,a tax-exempt organization,incurs lobbying expenses of $275,000 during the tax year.Help is eligible for and makes the § 501(h) lobbying expenditure election.During the year,Help spends $1,200,000 carrying out its exempt mission.
a.Will the lobbying expense result in Help losing its exempt status?
b.Calculate the amount of any tax that Help must pay associated with its lobbying expenses.
Q3) Tan,Inc. ,a tax-exempt organization,has $65,000 of net unrelated business income.Total charitable contributions (all associated with the unrelated trade or business) are $7,500.Assuming that the $7,500 was deducted in calculating net unrelated business income,what is Tan's unrelated business taxable income?
A)$57,500
B)$65,250
C)$66,000
D)$72,500
E)Some other amount.
Q4) Debt-financed income is the net income from debt financed property.
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25
Chapter 24: Multistate Corporate Taxation
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Q1) S corporations flow-through income amounts to its shareholders,and most states require a withholding of shareholder taxes on the allocated amounts.
A)True
B)False
Q2) Checking the customer's inventory to determine whether a reorder is needed.
Q3) List at least five items that are included in the payroll factor of a typical state.Consider all forms of compensation that an employee might receive.Apply the general UDITPA rules.
Q4) WillCo completes the construction of production facilities in S.
Q5) A typical U.S.state piggybacks its collections of the corporate income tax,by letting the Federal government collect and remit the corresponding tax to the state.
A)True
B)False
Q6) Your supervisor has shifted your responsibilities from the Federal corporate income tax to a multistate corporate income tax practice.In what areas might your Federal income tax knowledge also be applicable in your new assignment?
Q7) R adopts an increase in its statutory corporate income tax rates.
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Chapter 25: Taxation of International Transactions
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Q1) Mitch,an NRA,sells a building in Omaha for $1 million.His basis in the building is zero for both regular tax and AMT purposes.Mitch has no other contact with the U.S.other than the ownership of the building.How much Federal income tax is due from Mitch on the sale?
A)$0,he is an NRA.
B)The amount realized times the top individual tax rate.
C)The net gain times the top capital gains tax rate.
D)The net gain taxed at the lesser of the applicable regular or AMT rates.
Q2) Upon repatriation to a CFC,it does not create dividend income.
Q3) The § 367 cross-border transfer rules seem to counteract other favorable tax provisions that allow the taxpayer to defer gross income, e.g.§§ 351 and 368.What is the rationale for eliminating this deferral? Provide two examples of transactions to which § 367 would apply.
Q4) A non-U.S.citizen who holds a "green card."
Q5) Income of foreign person taxed through filing of a U.S.tax return with deductions allowed against gross income.
Q6) Your client holds foreign tax credit (FTC) carryforwards,i.e. ,it is in an "excess credit" position.Give at least three planning ideas that the client should implement,so as to free up the suspended FTCs.
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Chapter 26: Tax Practice and Ethics
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171 Verified Questions
171 Flashcards
Source URL: https://quizplus.com/quiz/66402
Sample Questions
Q1) Lori,a calendar year individual taxpayer,files her 2014 return on February 10,2016.She had obtained a six-month extension for filing her return.There was additional income tax of $30,000 due with the return.
a.What are Lori's penalties for failure to file and to pay?
a.change if Lori,before the due date of the return,had retained a CPA to prepare the return and it was the CPA's negligence that caused the delay? b.
Would your answer to
Q2) Which statement does not correctly describe the IRS letter ruling process?
A)Letter rulings can benefit both taxpayers and the IRS.
B)Letter rulings are issued by the Secretary of the Treasury Department.
C)Letter rulings can be seen only by the taxpayer who requested the ruling;they are also known as "private letter rulings."
D)Some letter rulings are of such importance and general interest that they are later published (in anonymous form) as Revenue Rulings.
Q3) The accuracy-related penalties typically relate to ____________________on the part of the taxpayer,or other understatements of tax.
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Page 28
Chapter 27: Family Tax Planning
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208 Verified Questions
208 Flashcards
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Sample Questions
Q1) The IRS does not consider property settlements in consideration of marriage as being transfers for valuable consideration.Consequently,such prenuptial settlements are subject to the Federal gift tax.Why,then,are property settlements incident to divorce exempt from the gift tax?
Q2) In 2013,Katherine made some taxable gifts upon which she paid a Federal gift tax of $96,000.If Katherine dies in 2015,the $96,000 is included in her gross estate under the "gross up" rule.
A)True
B)False
Q3) Interest on state and local bonds is not subject to the Federal estate tax.
A)True
B)False
Q4) At one point,the tax rates applicable to transfers by gift were lower than those applying to transfers by death.
A)True
B)False
Q5) Administration expenses attributable to handling the surviving spouse's share of the community property.
Q6) Tenancy by the entirety
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Chapter 28: Income Taxation of Trusts and Estates
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166 Verified Questions
166 Flashcards
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Sample Questions
Q1) Your client Pryce is one of the income beneficiaries of the Santiago Trust.Pryce says to you,"I want all of the exempt interest income from Santiago to be allocated to me,as I am the income beneficiary who is subject to the highest marginal Federal income tax rate." How do you respond to Pryce's request?
Q2) The Yan Estate is your client,as are many of the decedent's family members.Determine the tax effects of the indicated losses for the Yan Estate for both tax years.The estate holds a variety of investment assets,which it received from the decedent,Mrs.Yan.The estate's sole income and remainder beneficiary is Yan,Jr. Tax Year Loss Generated 2015 (first tax year) Taxable income ($300) Capital loss ($20,000) 2016 (final tax year) Taxable income ($40,000)
Q3) The Gibson Estate is responsible for collecting outstanding income amounts and paying the remaining obligations of Juanita Gibson,the deceased.How does Federal income tax law treat these items? Hint: Define and use the term income in respect of a decedent in your answer.
Q4) The interest income of a trust usually is allocable to ____________________ (income,remainder) beneficiaries.
Q5) A trust whose income can be distributed to beneficiaries and in amounts at the trustee's discretion.
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