Advanced Federal Taxation Exam Questions
Course Introduction
Advanced Federal Taxation delves into the complex tax issues faced by corporations, partnerships, estates, and trusts under U.S. federal law. The course covers the tax implications of business formations, operations, distributions, reorganizations, and liquidations, as well as wealth transfer and compliance topics. Students analyze Internal Revenue Code provisions, Treasury regulations, and relevant case law, developing a strong understanding of advanced tax planning, research techniques, and problem-solving within a business context. Emphasis is placed on ethical considerations, current developments, and practical applications relevant for aspiring tax professionals.
Recommended Textbook
South Western Federal Taxation 2012 Comprehensive by William H. Hoffman
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Chapter 1: An Introduction to Taxation and Understanding
the Federal Tax Law
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Q1) A provision in the law that compels accrual basis taxpayers to pay a tax on prepaid income in the year received and not when earned is consistent with generally accepted accounting principles.
A)True
B)False
Answer: False
Q2) Under state amnesty programs,all delinquent and unpaid income taxes are forgiven.
A)True
B)False
Answer: False
Q3) How are "stealth taxes" justified and how are they structured?
Answer: "Stealth taxes" can be justified on the basis of political expediency.They are structured to phase out (or eliminate)certain tax benefits (e.g.,deductions,credits)as income rises.Thus,they generate revenue without the unpopular stigma of being labeled as a tax.
Q4) Federal excise tax is no longer imposed on cosmetics.
A)True
B)False
Answer: True
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Chapter 2: Working With the Tax Law
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Sample Questions
Q1) The Internal Revenue Code was codified in which of the following years?
A) 1913.
B) 1933.
C) 1954.
D) 1957.
E) None of the above.
Answer: C
Q2) Texas is in the jurisdiction of the Sixth Circuit Court of Appeals.
A)True
B)False
Answer: False
Q3) What are Treasury Department Regulations?
Answer: Regulations are issued by the U.S.Treasury Department under authority granted by Congress.Interpretive by nature,they provide taxpayers with considerable guidance on the meaning and application of the Code.Regulations may be issued in proposed,temporary,or final form.Regulations carry considerable authority as the official interpretation of tax statutes.They are an important factor to consider in complying with the tax law.Courts generally ignore Proposed Regulations.
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4
Chapter 3: Tax Determination: Personal and Dependency
Exemptions: an Overview of Property Transactions
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Q1) Since an abandoned spouse is treated as single and has one or more dependent children,he or she qualifies for the standard deduction available to head of household.
A)True
B)False
Answer: True
Q2) 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
Q3) Maude's parents live in another state and she cannot claim them as her dependents.If Maude pays their medical expenses,can she derive any tax benefit from doing so? Explain.
Answer: If Maude could otherwise claim her parents as dependents except for not satisfying either the gross income or the joint return tests,she can claim any medical expenses paid on their behalf.
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5
Chapter 4: Gross Income: Concepts and Inclusions
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Q1) Jim and Nora,residents of a community property state,were married in early 2009.Late in 2009 they separated,and in 2011 they were divorced.Each earned a salary,and they received income from community owned investments in all relevant years.They filed separate returns in 2009 and 2010.
A) In 2010, Nora must report only her salary and one-half of the income from community property on her separate return.
B) In 2010, Nora must report on her separate return one-half of the Jim and Nora salary and one-half of the community property income.
C) In 2011, Nora must report on her separate return one-half of the Jim and Nora salary for the period they were married as well as one-half of the community property income and her income earned after the divorce.
D) In 2011, Nora must report only her salary on her separate return.
E) None of the above.
Q2) Alvin is the sole shareholder of an S corporation that earned $200,000 in 2011 and distributed $75,000 to Alvin.Alvin must recognize $75,000 as income from the S corporation in 2011.
A)True
B)False
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Chapter 5: Gross Income: Exclusions
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Q1) Workers' compensation benefits are included in gross income because the payments replace wages the individual would have otherwise received.
A)True
B)False
Q2) Carmen had worked for Sparrow Corporation for thirty years when she died of a heart attack at age 60.She was practically penniless at the time of her death,owed a $12,000 hospital bill,and had a disabled spouse.The company was very concerned about its public image,and rather than run the risk of embarrassment from one of its long-term employees dying and leaving her spouse with insufficient means,the Board of Directors agreed to pay Carmen's hospital bill and to give her spouse $6,000 per year for the rest of his life.Discuss both sides of the question whether Carmen (or her estate)and her spouse realize any taxable income from the above.
Q3) A debtor undergoing a Chapter 11 reorganization under the bankruptcy laws who receives a discharge of his or her liabilities has realized income but can exclude the debt reduction from gross income.
A)True
B)False
Q4) 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) Nikeya sells land (adjusted basis of $120,000)to her adult son,Shamed,for its appraised value of $95,000.Which of the following statements is correct?
A) Nikeya's recognized loss is $25,000 ($95,000 amount realized - $120,000 adjusted basis).
B) Shamed's adjusted basis for the land is $120,000 ($95,000 cost + $25,000 disallowed loss for Nikeya).
C) If Shamed subsequently sells the land for $112,000, he has no recognized gain or loss.
D) Only a. and b. are correct.
E) a., b., and c. are correct.
Q2) A political contribution to the Democratic Party or the Republican Party is not deductible,but a contribution to the Presidential Election Campaign Fund is deductible. A)True
B)False
Q3) Legal expenses incurred in connection with rental property are deductions from AGI. A)True B)False
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Chapter 7: Deductions and Losses: Certain Business
Expenses and Losses
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Q1) The amount of a farming loss cannot exceed the amount of the taxpayer's NOL for the taxable year.
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) On July 20,2009,Matt (who files a joint return)purchased 3,000 shares of Orange Corporation stock (the stock is § 1244 small business stock)for $24,000.On November 10,2010,Matt purchased an additional 1,000 shares of Orange Corporation stock from a friend for $150,000.On September 15,2011,Matt sold the 4,000 shares of stock for $120,000.How should Matt treat the sale of the stock on his 2011 return?
A) $54,000 ordinary loss.
B) $100,000 ordinary loss; $46,000 net capital gain.
C) $100,000 ordinary loss; $20,000 STCL.
D) $130,000 ordinary loss; $66,000 LTCG.
E) None of the above.
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Chapter 8: Depreciation, cost Recovery, amortization, and Depletion
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Q1) The statutory dollar cost recovery limits under § 280F do not apply to all automobiles.
A)True
B)False
Q2) The § 179 limit for a sports utility vehicle with a GVW of 7,000 pounds used for the production of income is $25,000.
A)True
B)False
Q3) Nora purchased a new automobile on July 20,2011,for $29,000.The car was used 60% for business and 40% for personal use.In 2012,the car was used 30% for business and 70% for personal use.Nora elects not to take additional first-year depreciation.Determine the cost recovery recapture and the cost recovery deduction for 2012.
Q4) If 150% declining-balance is used,there is no straight-line switchover.
A)True
B)False
Q5) Rod paid $950,000 for a new warehouse on April 14,2011.He sold the warehouse on September 29,2016.Determine the cost recovery deduction for 2011 and 2016.
Q6) Discuss the reason for the inclusion amount with respect to leased automobiles.
Page 10
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Chapter 9: Deductions: Employee and
Self-Employed-Related Expenses
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Q1) By itself,credit card receipts will not constitute adequate substantiation for travel expenses.
A)True
B)False
Q2) Christopher just purchased an automobile for $40,000 which he plans to claim 100% as being for business use.In order to take advantage of MACRS and § 179,he plans to use the actual cost method for determining his deduction in the first year.In subsequent years,he will switch to the automatic mileage method.Comment on Christopher's proposed approach.
Q3) Samuel,age 53,has a traditional deductible IRA with an account balance of $112,000.Of this amount,$82,000 represents contributions and $30,000 represents earnings.In 2011,he converts his traditional IRA into a Roth IRA.What amount must Samuel include in his gross income,if any,in 2011?
Q4) Rod is employed as an auditor by a CPA firm.On most days,he commutes by auto from his home to the office (18 miles round trip).During one month,however,he has an extensive audit assignment closer to home.For this engagement,Rod drives directly from home to the client's premises and back (30 miles round trip).How much,if any,of this mileage can Rod claim as a deduction?
Page 11
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Chapter 10: Deductions and Losses: Certain Itemized
Deductions
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Q1) During the year,Victor spent $300 on bingo games sponsored by his church.If all profits went to the church,Victor has a charitable contribution deduction of $300.
A)True
B)False
Q2) Harry and Sally were divorced three years ago.In July of the current year,their son,Joe,broke his arm falling out of a tree.Joe lives with Sally and Sally claims him as a dependent on her tax return.Harry paid for the medical expenses related to Joe's injury.Can Harry claim the medical expenses he paid for Joe on his tax return?
Q3) The election to itemize is appropriate when total itemized deductions are less than the standard deduction based on the taxpayer's filing status.
A)True
B)False
Q4) Employee business expenses for travel qualify as itemized deductions subject to the 2% floor if they are not reimbursed.
A)True
B)False
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Page 12
Chapter 11: Investor Losses
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Q1) Several years ago,Joy acquired a passive activity.Until 2009,the activity was profitable.Joy's at-risk amount at the beginning of 2009 was $250,000.The activity produced losses of $100,000 in 2009,$80,000 in 2010,and $90,000 in 2011.During the same period,no passive income was recognized.How much is suspended under the at-risk rules and the passive loss rules at the beginning of 2012? At-risk Passive loss
A) $0 $270,000.
B) $20,000 $250,000.
C) $30,000 $240,000.
D) $260,000 $10,000.
E) None of the above.
Q2) Kelly,who earns a yearly salary of $120,000,sold an activity with a suspended passive loss of $44,000.The activity was sold at a loss and Kelly has no other passive activities.The suspended loss is not deductible.
A)True
B)False
Q3) What special passive loss treatment is available to real estate activities?
Q4) Explain how a taxpayer's at-risk amount in a business venture is adjusted periodically.
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Page 13
Chapter 12: Tax Credits and Payments
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Q1) Realizing that providing for a comfortable retirement is up to them,Jim and Julie commit to making regular contributions to their IRAs,beginning this year.Consequently,they each make a $2,000 contribution to their traditional IRA.If their AGI is $37,000 on their joint return,what is the amount of their credit for certain retirement plan contributions?
A) $2,000.
B) $800.
C) $400.
D) $200.
E) None of the above.
Q2) If the cost of a building constructed and placed into service by an eligible small business in the current year includes the cost of a wheelchair ramp,the cost of the ramp qualifies for the disabled access credit.
A)True
B)False
Q3) A taxpayer may qualify for the credit for child and dependent care expenses if the taxpayer's dependent is under age 17.
A)True
B)False
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Chapter 13: Property Transactions
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Q1) If a taxpayer purchases a business and the price exceeds the fair market value of the listed assets,how is the excess allocated among the purchased assets?
Q2) What is a deathbed gift and what tax consequences apply?
Q3) Nigel purchased a blending machine for $125,000 for use in his business.As to the machine,he has deducted MACRS cost recovery of $31,024,maintenance costs of $5,200,and repair costs of $4,000.Calculate Nigel's adjusted basis for the machine.
Q4) Sam sells land with an adjusted basis of $35,000 and a fair market value of $50,000 to Cynthia,his wife,for $50,000.Discuss how the tax consequences would differ if Sam and Cynthia had never been married.
Q5) Discuss the treatment of realized gains from involuntary conversions.
Q6) Tariq sold certain U.S.Government bonds and State of Oregon bonds at a loss to offset short-term capital gain from a previous transaction.He felt that the U.S.Government and State of Oregon bonds were "good" investments,so he repurchased identical securities within one week.Do these transactions constitute wash sales?
Q7) Explain how the sale of investment property at a loss to a brother is treated differently from a sale to a nephew.
Q8) What is the general formula for calculating the adjusted basis of property?
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Chapter 14: Property Transactions: Capital Gains and Losses
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Q1) Rental use depreciable real estate held more than 15 months is an example of a § 1231 asset.
A)True
B)False
Q2) Ronald has the following capital gains and losses for 2011: $8,000 STCL,$6,000 28% gain,$4,000 25% gain,and $16,000 0%/15% gain.Which of the following is correct?
A) The net capital gain is composed of $2,000 25% gain and $16,000 0%/15% gain.
B) The net capital gain is composed of $6,000 28% gain and $12,000 0%/15% gain.
C) The net capital gain is composed of $6,000 28% gain, $4,000 25% gain, and $8,000 0%/15% gain.
D) The net capital gain is composed of $2,000 28% gain and $16,000 0%/15% gain.
E) None of the above.
Q3) Short-term capital losses are netted against long-term capital gains and long-term capital losses are netted against short-term capital gains.
A)True B)False
Q4) An individual taxpayer has the gains and losses shown below.There are $5,000 of § 1231 lookback losses.What is the net long-term capital gain?
Page 16
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Chapter 15: Alternative Minimum Tax
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Q1) For regular income tax purposes,Yolanda,who is single,is in the 35% tax bracket.Her AMT base is $220,000.Her tentative AMT is:
A) $57,200.
B) $58,100.
C) $61,600.
D) $77,000.
E) None of the above.
Q2) Carolyn has a personal casualty loss deduction of $8,500 for regular income tax purposes.The deduction would have been $17,600,but it had to be reduced by $100 and by $9,000 (10% ´ $90,000 AGI).For AMT purposes,the casualty loss deduction is $17,600.
A)True
B)False
Q3) The recognized gain for regular income tax purposes and the recognized gain for AMT purposes on the sale of stock acquired under an incentive stock option (ISO)program are always the same because the adjusted basis is the same.
A)True
B)False
Q4) For the ACE adjustment,discuss the relationship between ACE and unadjusted AMTI.
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Page 17
Chapter 16: Accounting Periods and Methods
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Q1) Related-party installment sales include all of the following except the first seller's:
A) Brothers and sisters.
B) Controlled corporations.
C) Lineal descendants and ancestors.
D) Partnerships in which the seller has an interest.
E) All of the above would be considered related parties.
Q2) The accrual basis taxpayer sold land for $100,000 on December 31,2011.He did not collect the $100,000 until January 2,2012.The land was held as an investment.
A) If the accrual basis taxpayer's basis in the land was $110,000, the loss would be recognized in 2012.
B) If the accrual basis taxpayer's basis in the land was $60,000, the gain must be reported in 2011.
C) If the accrual basis taxpayer's basis in the land was $60,000, the gain must be reported in 2012, unless the taxpayer elects to not use the installment method.
D) The accrual basis taxpayer must recognize the gain or loss in the year of sale.
E) None of the above.
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Chapter 17: Corporations: Introduction and Operating Rules
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Q1) Jessica,a cash basis individual,is a 60% shareholder of Crow Corporation,a regular corporation.On January 1,2011,Jessica loaned Crow $300,000,with the principal due in 5 years and 6% interest due each January 1.Crow,an accrual method,calendar year taxpayer,accrued $18,000 of interest expense on the loan on December 31,2011,and paid the $18,000 to Jessica on January 1,20117.How much is Crow's deduction for interest on this loan for 2011? Would your answer change if Jessica was a 25% shareholder of Crow?
Q2) For purposes of the estimated tax payment rules,a "large corporation" is defined as a corporation that had an average taxable income of $1 million or more over the preceding three-year period.
A)True
B)False
Q3) Canary Corporation,which sustained a $5,000 net capital loss during the year,will enter $5,000 as a addition item on Schedule M-1.
A)True
B)False
Q4) Describe the Federal tax treatment of entities formed as limited liability companies.
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Chapter 18: Corporations: Organization and Capital Structure
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Q1) Penny,Miesha,and Sabrina transfer property to Owl Corporation for 75% of its stock.Nancy,their attorney,receives 25% of the stock in Owl for legal services rendered in incorporating the business.What are the tax consequences of these transactions? How should this transaction have been handled?
Q2) Jane and Walt form Orange Corporation.Jane transfers equipment worth $475,000 (basis of $100,000)and cash of $25,000 to Orange Corporation for 50% of its stock.Walt transfers a building and land worth $525,000 (basis of $200,000)for 50% of Orange's stock and $25,000 cash.
A) Jane recognizes a gain of $375,000; Walt recognizes a gain of $325,000.
B) Jane recognizes a gain of $25,000; Walt recognizes no gain.
C) Neither Jane nor Walt recognizes gain.
D) Jane recognizes no gain; Walt recognizes a gain of $25,000.
E) None of the above.
Q3) In a § 351 transfer,a shareholder receives boot of $10,000 but ends up with a realized loss of $3,000.Only $7,000 of the boot will be taxed to the shareholder.
A)True
B)False
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Page 20
Chapter 19: Corporations: Distributions Not in Complete
Liquidation
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Q1) A shareholder's basis in property received in a stock redemption is the property's fair market value.
A)True
B)False
Q2) Julian,Berta,and Maria own 400 shares,400 shares,and 200 shares,respectively,in Caramel Corporation (E & P of $750,000).Berta is Julian's sister,and Maria is Julian's aunt.Caramel Corporation redeems all of Julian's stock for $420,000.Julian paid $200 a share for the stock five years ago.Julian continued to serve on Caramel's board of directors after the redemption.With respect to the redemption:
A) Dividend income of $420,000.
B) Long-term capital gain of $420,000.
C) Dividend income of $340,000.
D) Long-term capital gain of $340,000.
E) None of the above.
Q3) Explain the requirements for waiving the family attribution rules in the case of complete termination redemptions.
Q4) Constructive dividends have no effect on a distributing corporation's E & P.
A)True
B)False
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Chapter 20: Corporations: Distributions in Complete
Liquidation and an Overview of Reorganizations
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Q1) The text discusses four different limitations on loss recognition by liquidating corporations.Provide a brief description of each of these loss limitations.
Q2) One difference between the tax treatment accorded nonliquidating and liquidating distributions is with respect to the recognition of losses by the distributing corporation.As a general rule,a corporation recognizes losses on liquidating distributions of depreciated property (fair market value less than basis)but not on nonliquidating distributions of such property.
A)True
B)False
Q3) Shareholders may defer gain,to the point of collection,on a liquidating distribution of installment notes obtained by the corporation in the sale of its assets.
A)True
B)False
Q4) What are the tax consequences of a § 332 liquidation to the parent corporation,subsidiary corporation,and minority shareholder?
Q5) Describe the requirements for and tax consequences of a § 338 election.
Q6) Discuss the role of letter rulings in corporate reorganizations.
Page 22
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Chapter 21: Partnerships
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Q1) Maria owns a 60% interest in the KLM Partnership.Four years ago her father gave her a parcel of land.The gift basis of the land to Maria is $60,000.In the current year,Maria had still not figured out how to use the land for her own personal or business use; consequently,she sold the land to the partnership for $75,000.The partnership immediately started using the land as a parking lot for its employees.Maria's recognized gain of $15,000 on the sale is capital-not ordinary.
A)True
B)False
Q2) Eric receives a proportionate nonliquidating distribution when the basis of his partnership interest is $80,000.The distribution consists of $20,000 in cash and property with an adjusted basis to the partnership of $45,000 and a fair market value of $40,000.Eric's basis in the noncash property and his remaining basis in the partnership interest are:
A) $45,000; $35,000.
B) $45,000; $15,000.
C) $40,000; $40,000.
D) $40,000; $20,000.
E) None of the above.
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Chapter 22: S Corporations
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Q1) Which statement is false?
A) Partnership taxation rules do not apply to S corporations.
B) A two-or-more member LLC operates under partnership principles.
C) All income of an S corporation flows through to the S shareholders.
D) S shareholders may use their proportionate shares of NOLs currently.
E) None of the above.
Q2) Rents always are considered to be passive investment income in S status.
A)True
B)False
Q3) Compensation for services rendered to an S corporation is subject to FICA taxes.
A)True
B)False
Q4) Which could constitute a second class of stock under the S corporation rules?
A) Unissued stock.
B) Treasury stock.
C) Stock appreciation rights.
D) Convertible debentures.
E) None of the above.
Q5) An S corporation is limited to ____________________ (how many?)shareholders.
Q6) An S corporation may have ____________________ class(es)of stock.
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Chapter 23: Exempt Entities
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Q1) The excise tax imposed on a private foundation's excess business holdings is in effect an audit fee to defray IRS expenses.
A)True
B)False
Q2) Which of the following activities,whose proceeds benefit an exempt organization,are subject to the feeder organization rules?
A) A weekly raffle operated by paid employees.
B) A car wash operated on Saturdays by volunteers.
C) A yard sale of donated clothes.
D) A thrift shop run by volunteers.
E) None of the above is subject to the feeder organization rules.
Q3) What income and activities are not subject to the feeder organization rules?
Q4) A trade or business that is operated by an exempt organization which otherwise would be subject to the tax on unrelated business income is exempt from tax,if the profits generated by the trade or business are used by the exempt organization for exempt purposes.
A)True
B)False
Q5) Why are some organizations exempt from Federal income tax?
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Chapter 24: Multistate Corporate Taxation
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Q1) A number of court cases in the last several decades have involved the application of a state's nexus rules concerning a business taxpayer.What is the significance of the term nexus when discussing state income taxation?
Q2) Typically exempt from the sales/use tax base is the purchase of clothing from a neighbor's "garage sale."
A)True
B)False
Q3) In computing the property factor,property owned by the corporation typically is valued at its ____________________,plus the cost of additions and improvements,but without adjusting for ____________________. or
Q4) A unitary business is treated as a single entity for state tax purposes,with a combined apportionment formula including data from all of the operations of the business.
A)True B)False
Q5) The starting point in computing state taxable income generally is ____________________.
Q6) Summarize the principles of multistate tax planning.
Page 26
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Chapter 25: Taxation of International Transactions
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Q1) Chang,an NRA,is employed by Fisher,Inc.,a foreign corporation.In November,Chang spends 12 days in the United States performing consulting services for Fisher's U.S.branch.She earns $5,000 per month.A month includes 20 workdays.
A) Chang has no U.S.-source income, under the commercial traveler exception.
B) Chang has $3,000 U.S.-source income, since her foreign employer has a U.S. branch.
C) Chang has $60,000 U.S.-source income which is exempt from U.S. taxation, since she is in the U.S. for 90 days or less.
D) Chang has $60,000 U.S.-source income which is exempt from U.S. taxation, since she is working for a foreign employer.
Q2) Copp,Inc.,a domestic corporation,owns 30% of a CFC that has $50 million of earnings and profits for the current year.Included in that amount is $20 million of Subpart F income.Copp has been a CFC for the entire year and makes no distributions in the current year.Copp must include in gross income (before any § 78 gross-up):
A) $0.
B) $50 million.
C) $20 million.
D) $6 million.
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Chapter 26: Tax Practice and Ethics
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Q1) During an audit,the IRS might require that the taxpayer produce the ____________________ that underlie the tax return data.
Q2) Concerning a taxpayer's requirement to make quarterly estimated tax payments:
A) An individual must make estimated payments if his or her balance due for the Federal income tax for the year will exceed $1,000.
B) The due dates of the payments for a calendar-year C corporation are March, June, September, and December 15.
C) A C corporation must make estimated payments if its Federal income tax liability for the year will exceed $250.
D) A trust is not required to make estimated payments.
Q3) A taxpayer penalty may be waived if there is shown to be reasonable cause for the misstatement on the tax return.The courts have applied this standard strictly.List three or more assertions for a waiver of a taxpayer penalty that courts have found not to constitute reasonable cause.Example: Ignorance of the tax law.
Q4) The client has decided to dispute the Revenue Agent's Report.What is the tax advisor's next step?
Q5) To file for a tax refund,an individual generally uses Form ____________________.
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Chapter 27: The Federal Gift and Estate Taxes
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Q1) For Federal estate and gift tax purposes,the exclusion amount is the same thing as the exemption equivalent.
A)True B)False
Q2) Under the alternate valuation date election,each asset in the gross estate is valued at the lesser of the date of death value or six months thereafter.
A)True B)False
Q3) Calvin's will passes $800,000 of cash to his widowed sister,Muriel.The estate tax attributable to the cash is $110,000.Muriel dies seven years later,and the estate tax generated by the $800,000 is $100,000.How much of a credit for tax on prior transfers will Muriel's estate be allowed?
Q4) Sometimes also known as transaction taxes,Federal gift and estate taxes are excise taxes.
A)True B)False
Q5) In most cases,the gross estate of a decedent is larger than the probate estate. A)True B)False
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Chapter 28: Income Taxation of Trusts and Estates
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Q1) An example of income in respect of a decedent is the taxpayer's last paycheck,uncollected at death.
A)True
B)False
Q2) The Exeter Trust instrument provides that Tamara,the sole income beneficiary,is to receive $30,000 annually.If trust accounting income is not sufficient to pay this amount,the Exeter trustee is empowered to invade corpus to the extent necessary.During the current year,the trust has distributable net income (DNI)of $100,000,including $20,000 of tax-exempt interest.In accordance with the trust instrument,$30,000 is paid to Tamara.What is Tamara's gross income from Exeter for the current year?
A) $100,000.
B) $30,000.
C) $24,000.
D) $10,000.
Q3) ____________________ is the maximum amount that can be included in the beneficiaries' gross incomes from the fiduciary for the year.
Q4) A Form 1041 must be filed by an estate that recognizes $____________________ or more gross income for the tax year.
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