Advanced Federal Taxation Exam
Materials
Course Introduction
Advanced Federal Taxation delves into the complex federal tax issues facing corporations, partnerships, S corporations, and their stakeholders. The course examines the Internal Revenue Codes sophisticated provisions concerning formation, operation, distributions, mergers, acquisitions, and liquidations of business entities. Students will develop an understanding of tax planning and compliance strategies, recognize the impact of federal tax law on business decision-making, and explore current developments in IRS regulations, judicial interpretations, and ethical considerations for tax professionals. Analytical skills are honed through case studies and real-world problem-solving, preparing students for advanced roles in tax advisory and business strategy.
Recommended Textbook
South Western Federal Taxation 2011 Comprehensive 34th Edition by William
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Page 2
H. Hoffman
Chapter 1: An Introduction to Taxation and Understanding
the Federal Tax Law
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Sample Questions
Q1) For individual taxpayers,the interest rate for income tax refunds (overpayments)is the same as that applicable to assessments (underpayments).
A)True
B)False
Answer: True
Q2) As a matter of administrative convenience,the IRS would prefer to have Congress decrease (rather than increase)the amount of the standard deduction allowed to individual taxpayers.
A)True
B)False
Answer: False
Q3) Julius,a married taxpayer,makes gifts to each of his six children.A maximum of six annual exclusions could be allowed as to these gifts.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Working With the Tax Law
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Q1) Proposed Regulations are binding on the IRS and taxpayers.
A)True
B)False
Answer: False
Q2) Which statement is false with respect to tax treaties?
A)There is a $1,000 penalty per failure to disclose on the tax return where there is a direct treaty conflict for an individual.
B)There is a $10,000 penalty per failure to disclose on the tax return where there is a direct treaty conflict for a corporation.
C)Treaties override the Code when in conflict.
D)Treaties may override a Code section when in conflict.
E)None of the above.
Answer: C
Q3) Subchapter K refers to the "Partners and Partnerships" section of the Code.
A)True
B)False
Answer: True
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Chapter 3: Computing the Tax
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Sample Questions
Q1) Mel is not quite sure whether an expenditure he made is a deduction for AGI or a deduction from AGI.Since he plans to choose the standard deduction option for the year,does the distinction matter? Explain.
Answer: It makes a great deal of difference if the expenditure is a deduction for AGI.If it is,Mel will benefit taxwise.It makes no difference,however,if it is a deduction from.The standard deduction is in lieu of itemized deductions.
Q2) Emily,whose husband died in December 2010,maintains a household in which her dependent daughter lives.Which (if any)of the following is her filing status for the tax year 2010? (Note: Emily is the executor of her husband's estate. )
A)Single.
B)Married,filing separately.
C)Surviving spouse.
D)Head of household.
E)Married,filing jointly.
Answer: E
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Chapter 4: Gross Income: Concepts and Inclusions
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Q1) If the alimony recapture rules apply,the recipient of the alimony decreases his or her AGI by a portion of the amount included in gross income as alimony in a prior year or years.
A)True
B)False
Q2) Nicholas owned stock that decreased in value by $20,000 during the year,but he did not sell the stock.He earned $45,000 salary,but received only $34,000 because $11,000 in taxes were withheld.Nicholas saved $10,000 of his salary and used the remainder for personal living expenses.Nicholas's gross income for tax purposes exceeded his economic income for the year.
A)True
B)False
Q3) In December 2010,Mary collected the December 2010 and January 2011 rent from a tenant.Mary is a cash basis taxpayer.The amount collected in December 2010 for the 2011 rent should be included in her 2011 gross income.
A)True
B)False
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Chapter 5: Gross Income: Exclusions
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Sample Questions
Q1) Stuart owns 300 shares of Turquoise Corporation stock and 2,000 shares of Blue Corporation stock.During the year,Stuart received 150 shares of Turquoise as a result of a 1 for 2 stock split.The value of the shares received was $2,400.Stuart also received 100 shares of Blue Corporation stock as a result of a 5% stock dividend.Stuart did not have the option of receiving cash from Blue.The additional shares he received had a value of $3,600.Stuart's gross income from the receipt of the additional Turquoise and Blue shares is:
A)$0.
B)$2,400.
C)$3,600.
D)$6,000.
E)None of the above.
Q2) Mother participated in a qualified state tuition program for the benefit of her son.She contributed $14,000.When the son 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 her son,the son must include $6,000 in his gross income.
A)True
B)False
Q3) What Federal income tax benefits are provided for college students?
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Page 7
Chapter 6: Deductions and Losses: in General
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Q1) The amount of the addition to the reserve for bad debts for an accrual method taxpayer is allowed as a deduction for tax purposes.
A)True
B)False
Q2) Hollis operates a lawn care service in southeastern Missouri.He incurs $63,000 of expenses determining the feasibility of expanding the business to southwestern Missouri.If he expands the business,the $63,000 is deductible in the current year.If he does not do so,then he must amortize the $63,000 over a 180-month period.
A)True
B)False
Q3) Calvin opened his dental practice (a sole proprietorship)in May 2010.At the end of the year,he has unpaid accounts receivable of $36,000 and no unpaid accounts payable.Should Calvin use the accrual method or the cash method for his dental practice?
Q4) Are there any circumstances under which lobbying expenditures are deductible?
Q5) Why is it important to classify expenses as deductions for AGI or as deductions from AGI?
Q6) What losses are deductible by an individual taxpayer?
Q7) Are all personal expenses disallowed as deductions?
Page 8
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Chapter 7: Deductions and Losses: Certain Business
Expenses and Losses
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Sample Questions
Q1) If qualified production activities income (QPAI)cannot be used in the calculation of the domestic production activities deduction in 2010 because of the taxable income limitation,the product of the amount not allowed multiplied by 9% can be carried over for 5 years.
A)True
B)False
Q2) If a business debt previously deducted as partially worthless becomes totally worthless this year,only the amount not previously deducted can be deducted this year.
A)True
B)False
Q3) If a taxpayer has an NOL in 2010 of $20,000,of which $8,000 is attributable to a theft of personal use property,the taxpayer may:
A)Carry all of the NOL of $20,000 back 5 years.
B)Carry all of the NOL of $20,000 back 3 years.
C)Carry $8,000 of the NOL back 3 years and the remainder of the NOL of $12,000 back 2 years.
D)All of the above.
E)None of the above.
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Chapter 8: Depreciation,cost Recovery,amortization,and Depletion
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Sample Questions
Q1) Discuss the reason for the inclusion amount with respect to leased automobiles.
Q2) The statutory dollar cost recovery limits under § 280F for passenger automobiles do not apply if mid-quarter cost recovery is used.
A)True
B)False
Q3) Discuss the beneficial tax consequences of an SUV not being classified as a passenger automobile.
Q4) In a farming business,MACRS straight-line cost recovery is required for all fruit bearing trees.
A)True
B)False
Q5) All eligible real estate under MACRS is permitted a full month of cost recovery in the month of disposition.
A)True
B)False
Q6) ADS 150% declining-balance depreciation is used to compute earnings and profits.
A)True
B)False
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Chapter 9: Deductions: Employee and
Self-Employed-Related Expenses
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Q1) The work-related expenses of an independent contractor will be subject to the 2%-of-AGI floor.
A)True
B)False
Q2) After graduating from college with a degree in chemistry,Alberto obtains a job as a chemist with DuPont.Alberto's job search expenses qualify as deductions.
A)True
B)False
Q3) Elaine,the regional sales director for a manufacturer of exercise equipment,pays $2,500 to rent a skybox for a visiting performance of the Harlem Globetrotters.The skybox holds 10 seats,and Elaine invites 7 clients to the event.Nonluxury seats range in price from $80 to $120.The refreshments provided during the event cost $600.If Elaine meets all of the requirements for deductibility (i.e. ,business discussion,substantiation),she may deduct:
A)$1,550.
B)$1,500.
C)$1,260.
D)$1,100.
E)$900.
Page 11
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Chapter 10: Deductions and Losses: Certain Itemized
Deductions
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Sample Questions
Q1) Judy paid $40 for Girl Scout cookies and $40 for Boy Scout popcorn.Judy may claim an $80 charitable contribution deduction.
A)True
B)False
Q2) For purposes of computing the deduction for qualified residence interest,a qualified residence includes the taxpayer's principal residence and two other residences of the taxpayer or spouse.
A)True
B)False
Q3) The election to itemize is appropriate when the taxpayer's allowable itemized deductions exceed the allowable standard deduction.
A)True
B)False
Q4) Jerry pays $5,000 tuition to a parochial school run by his church in order to enable his daughter to attend.This is the amount the school charges all students.Part of the tuition payments can be claimed as a charitable contribution.
A)True
B)False
Page 12
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Chapter 11: Investor Losses
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Sample Questions
Q1) Explain how a taxpayer's at-risk amount in a business venture is adjusted periodically.
Q2) Tess owns a building in which she rents apartments to tenants and operates a restaurant.Which of the following statements is incorrect?
A)If 60% of Tess's gross income is from apartment rentals and 40% is from the restaurant,the rental operation and the restaurant business must be treated as separate activities.
B)If 95% of Tess's gross income is from apartment rentals and 5% is from the restaurant,she may treat the rental operation and the restaurant business as a single activity that is a rental activity.
C)If 5% of Tess's gross income is from apartment rentals and 95% is from the restaurant,she may treat the rental operation and the restaurant business as a single activity that is not a rental activity.
D)If 98% of Tess's gross income is from apartment rentals and 2% is from the restaurant,the rental operation and the restaurant business must be treated as a single activity that is not a rental activity.
E)None of the above.
Q3) What special passive loss treatment is available to real estate activities?
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Chapter 12: Tax Credits and Payments
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Sample Questions
Q1) Allan has a tentative general business credit of $220,000 for the current year.His net regular tax liability before the general business credit is $250,000,and his tentative minimum tax is $200,000.Compute Allan's allowable general business credit for the year.
Q2) Which of the following correctly describes the tax credit for rehabilitation expenditures?
A)The cost of enlarging any existing business building is a qualifying expenditure.
B)The cost of facilities related to the building (e.g. ,a parking lot)is a qualifying expenditure.
C)No recapture provisions apply.
D)No credit is allowed for the rehabilitation of personal use property.
E)None of the above.
Q3) The tax benefits resulting from tax credits and tax deductions are affected by the tax rate bracket of the taxpayer.
A)True
B)False
Q4) Explain the purpose of the tax credit for rehabilitation expenditures and describe the general characteristics of its computation.
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Chapter 13: Part 1--Property Transactions: Determination of
Gain or Loss,basis Considerations,and Nontaxable Exchanges
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Sample Questions
Q1) During 2010,Ted and Judy,a married couple,decided to sell their residence,which had a basis of $225,000.They had owned and occupied the residence for 16 years.To make it more attractive to prospective buyers,they had the outside painted in April at a cost of $10,000 and paid for the work immediately.They sold the house in May for $795,000.Broker's commissions and other selling expenses amounted to $45,000.Since they both are age 68,they decide to rent an apartment.They purchase an annuity with the net proceeds from the sale.What is the realized gain?
A)$750,000.
B)$525,000.
C)$515,000.
D)$0.
E)None of the above.
Q2) A realized gain whose recognition is postponed results in the temporary recovery of less than the taxpayer's cost or other basis.
A)True
B)False
Q3) In a nontaxable exchange,the replacement property is assigned a carryover basis.
A)True
B)False
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Chapter
13: Part 2--Property Transactions: Determination of
Gain or Loss,basis Considerations,and Nontaxable Exchanges
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Sample Questions
Q1) Discuss the treatment of realized gains from involuntary conversions.
Q2) Distinguish between a direct involuntary conversion and an indirect involuntary conversion.
Q3) Define qualified small business stock under § 1045.
Q4) Louis sold his farm during the current taxable year.At the date of the sale,the farm had an adjusted basis of $212,000 and was encumbered by a mortgage of $190,000.The buyer paid him $110,000 in cash,agreed to take the title subject to the $190,000 mortgage,and agreed to pay him $80,000 with interest at 9 percent one year from the date of sale.How much is Louis' recognized gain on the sale?
Q5) Amanda uses a delivery van in her business.The adjusted basis is $21,000,and the fair market value is $18,000.The delivery van is stolen and Amanda receives insurance proceeds of $18,000.Determine Amanda's realized and recognized gain or loss.
Q6) Taxpayer's principal residence is destroyed by a tornado.Taxpayer is single and his realized gain is $400,000.Is it possible for the taxpayer's recognized gain to be $0?
Q7) Can dividend treatment result to a shareholder on a distribution from a corporation that has no E & P?
Q8) For disallowed losses on related-party transactions,who has the right of offset? Page 16
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Page 17
Chapter 14: Property Transactions: Capital Gains and Losses,1231,and
Recapure Provisions
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Sample Questions
Q1) Harold is a mechanical engineer and,while unemployed,invents a switching device for computer networks.He patents the device,but does not reduce it to practice.Harold has a zero tax basis for the patent.In consideration of $300,000 plus a $1 royalty per device sold,Harold assigns the patent to a computer manufacturing company.Harold assigned all substantial rights in the patent.Which of the following is correct?
A)Harold automatically has long-term capital gain from the lump sum payment,but not from the royalty payments.
B)Harold automatically has long-term capital gain from the royalty payments,but not from the lump sum payment.
C)Harold automatically has long-term capital gain from both the lump sum payment and the royalty payments.
D)Harold does not have automatic long-term capital gain from either the lump sum payment or the royalty payments.
E)None of the above.
Q2) Describe the circumstances in which the maximum unrecaptured § 1250 gain (25% gain)does not become part of the Schedule D netting process for an individual taxpayer?
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Page 18
Chapter 15: Alternative Minimum Tax
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Sample Questions
Q1) The AMT does not apply to qualifying "small corporations."
A)True
B)False
Q2) If the tentative AMT is less than the regular income tax,the AMT will be zero.
A)True
B)False
Q3) Which of the following statements is correct?
A)The deduction for personal and dependency exemptions is not permitted in calculating the AMT.Therefore,in converting regular taxable income to AMTI,a positive adjustment is required.
B)To the extent that part of the deduction for personal and dependency exemptions is phased out because the taxpayer's AGI exceeds the threshold amount,the amount of the AMT adjustment is smaller than it otherwise would have been.
C)To the extent that itemized deductions exceed the standard deduction for regular income tax purposes,a positive AMT adjustment is required in converting regular taxable income to AMTI.
D)Only a.and b.are correct.
E)a. ,b. ,and c.are correct.
Q4) Why is there no AMT adjustment for charitable contributions?
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Chapter 16: Accounting Periods and Methods
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Q1) Pink Corporation is an accrual basis taxpayer that uses the recurring item exception to the economic performance test for all relevant years.For 2011,the corporation's income subject to state income tax was $400,000 and the state corporate tax rate was 6%.During 2011,the corporation paid $18,000 on its estimated state income tax liability for that year.The remaining $6,000 of 2011 state income tax was paid in April 2012.In June 2011,the corporation paid $9,000 on its year 2010 state income tax liability,as a result of an audit of the 2010 return that was conducted in 2011.As a result of the above:
A)Pink should deduct $33,000 as state income taxes for 2011.
B)Pink should deduct $27,000 as state income taxes for 2011.
C)Pink should deduct $24,000 as state income taxes for 2011 and amend its 2010 return to claim an additional $9,000 state income tax expense.
D)Pink should deduct $18,000 as state income taxes for 2011,amend its 2010 return to claim an additional $9,000 state income tax expense,and deduct $6,000 in 2012.
E)None of the above.
Q2) What incentives do the tax accounting rules provide for taxpayers to voluntarily change from an incorrect method of accounting that has reduced the company's tax liability in prior years?
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Page 20
Chapter 17: Corporations: Introduction and Operating Rules
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Q1) Zircon Corporation donated scientific property worth $300,000 to City University (a qualified charitable organization)to be used in research.The basis of the property was $140,000,and Zircon had held it for ten months as inventory.Zircon Corporation may deduct $220,000 as a charitable contribution (ignoring the taxable income limitation).
A)True
B)False
Q2) Canary Corporation,which sustained a $5,000 net capital loss during the year,will enter $5,000 as a subtraction item on Schedule M-1.
A)True
B)False
Q3) Black Corporation,an accrual basis taxpayer,was formed and began operations on February 1,2010.During its first year of operations (February 1 - December 31,2010),Black incurred the following expenses: fee paid to state of incorporation of $1,000,accounting and legal services incident to organization of $7,000,and expenses related to the printing and sale of stock certificates of $9,000.Black has $17,000 of qualified organizational expenditures that it may elect to amortize.
A)True
B)False
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Chapter 18: Corporations: Organization and Capital Structure
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Q1) When depreciable property is transferred to a controlled corporation under § 351,any recapture potential disappears and does not carry over to the corporation.
A)True
B)False
Q2) When consideration is transferred to a corporation in return for stock,the definition of "property" is important because tax deferral treatment of § 351 is available only to taxpayers who transfer property.
A)True
B)False
Q3) Eileen transfers property worth $200,000 (basis of $60,000)to Goldfinch Corporation.In return,she receives 80% of the stock in Goldfinch Corporation (fair market value of $180,000)and a long-term note (fair market value of $20,000)executed by Goldfinch and made payable to Eileen.Eileen recognizes gain on the transfer of:
A)$0.
B)$20,000.
C)$60,000.
D)$140,000.
E)None of the above.
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Chapter 19: Corporations: Distributions Not in Complete Liquidation
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Q1) Falcon Corporation has $200,000 of current E & P and a deficit in accumulated E & P of $90,000.If Swan pays a $300,000 distribution to its shareholders on July 1,how much dividend income do the shareholders report?
A)$0.
B)$10,000.
C)$110,000.
D)$200,000.
E)None of the above.
Q2) Hazel,Emily,and Frank,unrelated individuals,own all of the stock in Wren Corporation (E & P of $900,000)as follows: Hazel,250 shares;Emily,250 shares;and Frank,1,000 shares.Wren redeems 400 of Frank's shares (basis of $40,000)for $200,000.With respect to the distribution in redemption of the stock:
A)Frank has a capital gain of $200,000.
B)Frank has dividend income of $200,000.
C)Frank has dividend income of $160,000.
D)Frank has a capital gain of $160,000.
E)None of the above.
Q3) Explain the requirements for waiving the family attribution rules in the case of complete termination redemptions.
Page 23
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Chapter 20: Distributions in Complete Liquidation and an
Overview of Reorganizations
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Q1) As a general rule,a liquidating corporation recognizes gains and losses on the distribution of property in complete liquidation.
A)True
B)False
Q2) The gain postponed by a corporation in a corporate reorganization is the difference between the realized gain and the boot recognized.
A)True
B)False
Q3) If a liquidation qualifies under § 332,any minority shareholder will recognize gain (but not loss)equal to the difference between the fair market value of assets received and the basis of the shareholder's stock.
A)True
B)False
Q4) Corporate reorganizations can meet the requirements to qualify as like-kind exchanges if there is no boot involved.
A)True
B)False
Q5) Describe the requirements for and tax consequences of a § 338 election.
Page 24
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Chapter 21: Partnerships
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Q1) MEM Partners was formed during the current tax year.It incurred $20,000 of organizational expenses,$100,000 of startup expenses,and $200,000 of syndication costs.Which of the following statements is correct regarding these payments?
A)MEM may deduct $5,000 of the syndication costs;the remaining amount must be amortized.
B)MEM must amortize the $20,000 of organizational expenses over 180 months.
C)MEM's startup expenses are amortized over 60 months.
D)MEM must file an election to deduct and/or amortize its organizational expenses,startup costs,and syndication costs.
E)None of the above statements are true.
Q2) Which one of the following statements regarding partnership taxation is always correct?
A)A partnership is a taxable entity for Federal income tax purposes.
B)Partnership income is comprised of ordinary partnership income or loss and separately stated items.
C)A partnership is not required to file a tax return.
D)A partner's profit-sharing ratio will equal the partner's capital-sharing ratio.
E)None of these statements are correct.
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Chapter 22: S Corporations
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Q1) An S election is made on Form 2550.
A)True
B)False
Q2) An S corporation's AAA cannot have a negative balance.
A)True
B)False
Q3) Compensation for services rendered to an S corporation is not subject to FICA taxes.
A)True
B)False
Q4) Fred is the sole shareholder of an S corporation in Fort Deposit,Alabama.At a time when his stock basis is $10,000,the corporation distributes appreciated property worth $100,000 (basis of $10,000).There is no built-in gain.Fred's taxable gain is:
A)$0.
B)$10,000.
C)$90,000.
D)$100,000.
E)None of the above.
Q5) Outline the requirements that an entity must meet to elect S corporation status.
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Chapter 23: Exempt Entities
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Q1) Which exempt organizations are not required to file an annual Federal tax return?
Q2) Which of the following statements regarding the disclosure Regulations is correct?
A)Posting the required tax forms on the Internet is an acceptable technique for satisfying the "widely available requirement."
B)Forms 990 and 1023 must be readily available to the general public.
C)If an individual requests a copy of the required tax forms in writing,the exempt entity must provide a copy within 30 days.
D)Only a.and b.are correct.
E)a. ,b. ,and c.are all correct.
Q3) What are intermediate sanctions and to what types of exempt organizations do they apply?
Q4) What is a feeder organization? How is it taxed?
Q5) Unrelated debt-financed income,net of the unrelated debt-financed deductions,is subject to the unrelated business income tax only if the exempt organization is a private foundation.
A)True
B)False
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Page 27
Chapter 24: Multistate Corporate Taxation
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Q1) A service engineer spends 60% of her time maintaining the employer's productive business property and 40% maintaining the employer's nonbusiness rental properties.This year,her compensation totaled $90,000.The payroll factor assigns $90,000 to the state in which the employer is based.
A)True
B)False
Q2) For most taxpayers,which of the traditional apportionment factors yields the greatest opportunities for tax reduction?
A)Payroll.
B)Property.
C)Unitary.
D)Sales (gross receipts).
Q3) Only a few states have adopted an alternative minimum tax,similar to the Federal system.
A)True
B)False
Q4) States collect the most tax dollars from the sales/use tax.
A)True
B)False
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Chapter 25: Taxation of International Transactions
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Sample Questions
Q1) Which of the following would not prevent an alien without a "green card" from being classified as a U.S.resident for income tax purposes?
A)The individual was in the United States to oversee her investments.
B)The individual was prevented from leaving the United States due to an illness which arose while in the United States.
C)The individual is a foreign consul assigned to the United States.
D)The individual commutes daily from Mexico to the United States to work.
Q2) U.S.taxpayers may take a current FTC equal to the lesser of the FTC limit or the actual foreign taxes (direct or indirect).
A)True
B)False
Q3) Describe the importance of determining whether a foreign corporation is engaged in a U.S.trade or business.
Q4) ForCo,a foreign corporation incorporated in Belgium,manufactures widgets in Belgium and sells the widgets to its 100%-owned subsidiary in Germany.The income from the sale of widgets is foreign base company sales income.
A)True
B)False
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Chapter 26: Tax Practice and Ethics
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135 Verified Questions
135 Flashcards
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Sample Questions
Q1) The AICPA's Statements on Standards for Tax Services are advisory,not mandatory,on its members.
A)True
B)False
Q2) A "field audit" takes place at the headquarters of the corporate taxpayer.
A)True
B)False
Q3) George,a calendar year taxpayer subject to a 45% marginal gift tax rate,made a gift of a sculpture to Redd,valuing the property at $100,000.The IRS later valued the gift at $140,000.The applicable undervaluation penalty is:
A)$7,200.
B)$3,600.
C)$1,000 (minimum penalty).
D)$0.
Q4) A C corporation is not subject to an underpayment penalty until more than $____________________ is due and unpaid through estimated taxes.
Q5) How is the tax law affected by Federal criminal statutes?
Q6) How do rulings issued by the IRS benefit both the taxpayer and the IRS?
Q7) Why should the tax practitioner study the workings of the IRS?
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Chapter 27: The Federal Gift and Estate Taxes
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144 Verified Questions
144 Flashcards
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Sample Questions
Q1) Two brothers,Sam and Bob,acquire real estate as equal tenants in common.Of the purchase price of $200,000,Sam furnished $80,000 while Bob provided the balance.If Sam dies first ten years later when the real estate is worth $600,000,his estate includes $240,000 as to the property.
A)True
B)False
Q2) In 1985,Thalia purchases land for $900,000 and lists title in the names of her daughters as follows: "April and Theresa,joint tenants with right of survivorship." In 1990,April and Theresa purchase an apartment building for $1 million as equal tenants in common;April furnished $400,000 and Theresa furnished $600,000 of the cost.In the current year,April dies first in 2009 when the land is worth $1.5 million and the apartment building is worth $2 million.One of the results of these transactions is:
A)April made a gift to Theresa of $100,000 in 1990.
B)None of the land is included in April's gross estate.
C)April's gross estate includes $800,000 (40% * $2 million)as to the apartment building.
D)April's gross estate includes $1,750,000 as to these properties.
E)None of the above.
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Chapter 28: Income Taxation of Trusts and Estates
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132 Verified Questions
132 Flashcards
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Sample Questions
Q1) To reduce trustee commissions,the Emily Trust is operated as though it were two trusts (i.e. ,with 70-year-old Grandma and 7-year old Skippy each holding equal shares).This year the trust generated distributable net income (DNI)of $80,000.The trustee distributed $90,000 to Grandma this year: $40,000 as her one-half share of the entity's income,and $50,000 as a distribution of principal.How much of the year's distributable net income is assigned to Grandma?
A)$90,000.
B)$80,000.
C)$50,000.
D)$40,000.
Q2) "First-tier distributions" allowed by the will or trust document are made at the discretion of the executor or trustee.
A)True
B)False
Q3) A gift to charity is deductible on an estate's Form 1041 if it is made within ____________________ of the end of the tax year.
Q4) Once the distributable net income (DNI)of a trust or estate is known,how does the entity compute its deduction for distributions to beneficiaries?
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