Corporate Taxation
Textbook Exam Questions
Course Introduction
Corporate Taxation explores the legal, economic, and practical dimensions of how corporations are taxed in the United States. The course covers the fundamentals of federal income taxation applied to corporations and their shareholders, including topics such as corporate formation, distributions, dividends, liquidations, mergers, acquisitions, and tax planning strategies. Students will analyze relevant statutes, regulations, and case law, gaining insights into corporate tax compliance, policy considerations, and current issues in corporate tax reform. This course equips students with the knowledge needed for careers in corporate law, accounting, and finance, emphasizing problem-solving and critical thinking skills in the context of tax law.
Recommended Textbook
South Western Federal Taxation 2019 Comprehensive 42nd Edition by David M. Maloney
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Chapter 1: An Introduction to Taxation and Understanding
the Federal Tax Law
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Sample Questions
Q1) A Federal deduction for state and local income taxes paid.
A)Economic considerations
B)Social considerations
C)Equity considerations
D)Both a. and b.
Answer: C
Q2) Tax brackets are increased for inflation.
A)Economic considerations
B)Social considerations
C)Equity considerations
D)Both a. and b.
Answer: C
Q3) The ad valorem tax on personal use personalty is more often avoided by taxpayers than the ad valorem tax on business use personalty.
A)True
B)False
Answer: True
Q4) What might cause an individual to owe income taxes in more than one state?
Answer: Working in more than one state, or owning income-generating property in more than one state.
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Chapter 2: Working with the Tax Law
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Sample Questions
Q1) Revenue Procedures deal with the internal management practices and procedures of the IRS.
A)True
B)False
Answer: True
Q2) Technical Advice Memoranda deal with completed transactions.
A)True
B)False
Answer: True
Q3) Which statement is not true with respect to a Regulation that interprets the tax law?
A) Issued by the U.S. Congress.
B) Issued by the U.S. Treasury Department.
C) Designed to provide an interpretation of the tax law.
D) Carries more legal force than a Revenue Ruling.
E) All of these statements are true.
Answer: A
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Page 4
Chapter 3: Computing the Tax
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Sample Questions
Q1) In terms of the tax formula applicable to individual taxpayers, which, if any, of the following statements is correct?
A) In arriving at AGI, a taxpayer must elect between claiming deductions for AGI and deductions from AGI.
B) In arriving at taxable income, a taxpayer must elect between claiming deductions for AGI and deductions ???? ???.
C) If a taxpayer has deductions for AGI, the standard deduction is not available.
D) In arriving at taxable income, a taxpayer must elect between deductions for AGI and the standard deduction.
E) None of these.
Answer: E
Q2) When married persons file a joint return, joint and several liability results. What does this mean?
Answer: Joint and several liability means that either spouse is fully liable for any income tax due for the year. Thus, if more tax is due, the IRS can pursue either spouse for the deficiency.
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Chapter 4: Gross Income: Concepts and Inclusions
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Q1) In all community property states, the income from property that was inherited by a spouse after the marriage is treated as all earned by the spouse who inherited the property.
A)True
B)False
Q2) When a business is operated as an S corporation, a disadvantage is that the shareholder must pay the tax on his or her share of the S corporation's income even though the S corporation did not distribute the income to the shareholder.
A)True
B)False
Q3) Katherine is 60 years old and is bargaining with her employer over deferred compensation. In exchange for reducing her current year's salary by $50,000, she can receive a lump-sum amount in 5 years, when she will retire. If she receives the $50,000 in the current year, she will invest in certificates of deposit that yield 5%. Katherine is in the 24% marginal tax bracket in all relevant years. What is the minimum amount Katherine should accept as a deferred pay option? [Hint: the compound interest factor is 1.1934.]
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Chapter 5: Gross Income: Exclusions
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Sample Questions
Q1) 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?
Q2) Juan, was considering purchasing an interest in a tax-exempt bond fund for $100,000, when he discovered that the interest must be included on his state income tax return. The interest rate is 5%. His marginal Federal tax rate is 35%, and his marginal state income tax rate is 10%. Juan itemizes his deductions on his Federal income tax return. As an alternative, Juan can purchase a state bond (a "double-exempt bond") yielding 4.9% interest that is exempt from both Federal and state income tax. Which investment would yield the greater after-tax return?
Q3) Calvin miscalculated his income in 2016 and overpaid his state income tax by $10,000. In 2017, he amended his 2016 state income tax return and received a $10,000 refund and $900 interest. Calvin itemized his deductions in 2016, deducting $12,000 in state income tax and $30,000 total itemized deductions. As a result of the amended return in 2017, Calvin must recognize $10,900 of gross income.
A)True
B)False
Q4) What Federal income tax benefits are provided for college students?
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Chapter 6: Deductions and Losses: In General
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Sample Questions
Q1) Iris, a calendar year cash basis taxpayer, owns and operates several TV rental outlets in Florida, and wants to expand to other states. During 2018, she spends $14,000 to investigate TV rental stores in South Carolina and $9,000 to investigate TV rental stores in Georgia. She acquires the South Carolina operations, but not the outlets in Georgia. As to these expenses, Iris should:
A) Capitalize $14,000 and not deduct $9,000.
B) Expense $23,000 for 2018.
C) Expense $9,000 for 2018 and capitalize $14,000.
D) Capitalize $23,000.
E) None of the above.
Q2) Janet is the CEO for Silver, Inc., a closely held corporation. Her total compensation for 2018 is $5 million. Of this amount, $2 million is a salary and $3 million is a bonus. The bonus was calculated as 5% of Silver's net income before the bonus and before taxes ($60 million × 5% = $3 million). The bonus provision has been in effect since Janet became CEO five years ago and is related to Silver's performance. It is approved annually by the entire board of directors (1 of the 5 directors is an outside director) of Silver. How much of Janet's compensation can Silver deduct for 2018?
Q3) Briefly discuss the disallowance of deductions for capital expenditures.
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Chapter 7: Deductions and Losses: Certain Business
Expenses and Losses
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Sample Questions
Q1) The purpose of the "excess business loss" rules are to limit the amount of non-business income (e.g., salaries, interest, dividends, etc.) that can be "sheltered" from tax as a result of business losses.
A)True
B)False
Q2) In 2018, personal casualty gains are allowed to offset personal casualty losses. If an excess casualty loss results, it is not deductible (unless attributable to a Federally-declared disaster).
A)True
B)False
Q3) A nonbusiness bad debt deduction can be taken any year after the debt becomes totally worthless.
A)True
B)False
Q4) A theft loss of investment property is an itemized deduction not subject to the 2%-of-AGI floor.
A)True
B)False
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Chapter 8: Depreciation, Cost Recovery, Amortization, and Depletion
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Sample Questions
Q1) Which of the following assets would be subject to cost recovery?
A) A painting by Picasso hanging on a physician's office wall.
B) An antique vase in a doctor's waiting room.
C) Landscaping around the doctor's office.
D) a., b., and c.
E) None of the above.
Q2) On June 1, 2018, Norm leases a taxi and places it in service. The lease payments are $1,000 per month. Assuming the dollar amount from the IRS table for such leases is $241, determine Norm's gross income inclusion amount.
A) $0
B) $241
C) $907
D) $1,687
E) None of the above
Q3) On June 1, 2018, Gabriella purchased a computer and peripheral equipment (five-year property) for $25,000. She used the assets 40% for business, 50% for the production of income, and 10% for personal use. These are the only assets Gabriella purchased during the current year. Determine her total cost recovery deduction for the current year.
Page 10
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Chapter 9: Deductions: Employee and
Self-Employed-Related Expenses
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Sample Questions
Q1) Tax advantages of being self-employed (rather than being an employee) include:
A) The self-employment tax is lower than the Social Security tax.
B) The overall limitation (50%) on meals does not apply.
C) An office in the home deduction (for AGI) is available.
D) Job-related expenses are deductions for AGI.
E) Both c. and d. are advantages.
Q2) In the case of an office in the home deduction, the exclusive business use test does not apply when the home is used as a daycare center.
A)True
B)False
Q3) Jackson gives his supervisor and her husband each a $30 box of chocolates at Christmas. Jackson may claim only $25 as a deduction.
A)True
B)False
Q4) After the automatic mileage rate has been set by the IRS for a year, it cannot later be changed by the IRS.
A)True
B)False
Q5) Sue does not file a Schedule SE with her Form 1040.
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Chapter 10: Deductions and Losses: Certain Itemized
Deductions
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Sample Questions
Q1) A physician recommends a private school for Ellen's dependent child. Because of the physician's recommendation, the cost of the private school will qualify as a medical expense deduction (subject to percentage limitations).
A)True
B)False
Q2) Linda borrowed $60,000 from her parents for a down payment on a condominium. She paid interest of $5,500 in 2016, $0 in 2017, and $9,000 in 2018. The IRS disallowed the deduction. Can you offer any explanation for the disallowance?
Q3) A taxpayer pays points to obtain financing to purchase a second residence. At the election of the taxpayer, the points can be deducted as interest expense for the year paid.
A)True
B)False
Q4) 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?
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Chapter 11: Investor Losses
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Sample Questions
Q1) Gloria owns and works fulltime at a shop that rents watercraft of various types to tourists who are vacationing at the beach. If she generates a loss from that activity, the loss is subject to the passive activity loss rules because it is rental property.
A)True
B)False
Q2) In 2018, Emily invests $120,000 in a limited partnership that is not a passive activity. During 2018, her share of the partnership loss is $90,000. In 2019, her share of the partnership loss is $50,000. How much can Emily deduct in 2018 and 2019?
Q3) Treatment of suspended credits when passive activity is sold at a loss.
Q4) Tom participates for 100 hours in Activity A and 450 hours in Activity B, both of which are nonrental businesses. Both activities are active.
A)True
B)False
Q5) Active participation.
Q6) Significant participation activity.
Q7) Material participation.
Q8) Treatment of a disposition of a passive activity at death.
Page 13
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Chapter 12: Tax Credits and Payments
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Sample Questions
Q1) Phil and Audrey, husband and wife, both are employed by Laurel Corporation. Phil earns $135,000 in salary in 2018, and Audrey earns $70,000. How much FICA tax must they pay for 2018?
Q2) In 2018, George and Martha are married and file a joint tax return claiming their two children, ages 10 and 8 as dependents. Assuming their AGI is $119,650, George and Martha's child tax credit is:
A) $0.
B) $2,000.
C) $3,000.
D) $4,000.
Q3) The earned income credit is available only if the taxpayer has at least one qualifying child in the household.
A)True B)False
Q4) Only self-employed individuals are required to make estimated tax payments. A)True B)False
Q5) Explain the purpose of the disabled access credit and describe the general characteristics of its computation.
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Chapter 13: Property Transactions: Determination of Gain or
Loss, Basis Considerations, and Nontaxable Exchanges
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Q1) Which of the following statements is correct?
A) The receipt of boot in a § 1031 like-kind exchange can result in the recognition of gain.
B) The receipt of boot in a § 1031 like-kind exchange cannot result in the recognition of loss.
C) The giving of boot in a § 1031 like-kind exchange can result in the recognition of gain.
D) Only a. and b.
E) a., b., and c.
Q2) Melvin receives stock as a gift from his uncle. No gift tax is paid. The adjusted basis of the stock is $30,000 and the fair market value is $38,000. Melvin trades the stock for bonds with a fair market value of $35,000 and $3,000 cash. What is his recognized gain and the basis for the bonds?
A) $0, $30,000.
B) $5,000, $33,000.
C) $5,000, $30,000.
D) $8,000, $33,000.
E) None of the above.
Q3) What is the general formula for calculating the adjusted basis of property?
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Chapter 14: Property Transactions: Capital Gains and
Losses, Section 1231, and Recapture Provisions
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Q1) A security that was purchased by an individual and qualifies as § 1244 stock becomes worthless. The taxpayer is single and the loss is $30,000. The loss is treated as an ordinary loss.
A)True
B)False
Q2) On June 1, 2018, Brady purchased an option to buy 1,000 shares of General, Inc. at $40 per share. He purchased the option for $3,000. It was to remain in effect for five months. The market experienced a decline during the latter part of the year, so Brady decided to let the option lapse as of December 1, 2018. On his 2018 tax return, what should Brady report?
A) A $3,000 long-term capital loss.
B) A $3,000 short-term capital loss.
C) A $3,000 § 1231 loss.
D) A $3,000 ordinary loss.
E) None of the above.
Q3) The § 1245 depreciation recapture potential does not reduce the amount of the charitable contribution deduction under § 170.
A)True
B)False
Page 16
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Chapter 15: Taxing Business Income
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Q1) The QBI deduction will reduce both the income tax and self-employment taxes owed by a self-employed individual.
A)True
B)False
Q2) Eagle Company, a partnership, had a short-term capital loss of $10,000 during the current 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) A partnership will need to report wages paid to its employees as a separate line item on Schedule K-1 to help partners calculate their QBI deduction.
A)True
B)False
Q4) Employment taxes apply to all entity forms of operating a business. As a result, employment taxes are a neutral factor in selecting the most tax effective form of operating a business.
A)True
B)False
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Chapter 16: Accounting Periods and Methods
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Q1) Kathy was a shareholder in Matrix, Inc., when she sold the corporation a commercial building. The building cost $500,000 and the balance in the accumulated depreciation account was $400,000. Matrix, Inc., paid $100,000 in the year of sale and gave Kathy a note for $400,000 plus adequate interest due in 2019.
A) Because Kathy is a shareholder in Matrix, she cannot report the gain by the installment method.
B) Generally, if Kathy owned 100% of the Matrix stock, Kathy cannot use the installment method.
C) Generally, if Kathy owned only 60% rather than 100% of the Matrix stock, she could use the installment method.
D) Kathy cannot use the installment method to report the gain because the realized gain is equal to the depreciation she claimed on the building.
E) None of the above.
Q2) A positive § 481 adjustment from a change in method of accounting initiated by the taxpayer is spread equally over the year of change and the three following years.
A)True
B)False
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Page 18
Chapter 17: Corporations: Introduction and Operating Rules
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Q1) Luis is the sole shareholder of a regular C corporation, and Eduardo owns a proprietorship. In the current year, both businesses make a profit of $80,000 and each owner withdraws $50,000 from his business. With respect to this information, which of the following statements is incorrect?
A) Eduardo must report $80,000 of income on his return.
B) Luis must report $80,000 of income on his return.
C) Eduardo's proprietorship is not required to pay income tax on $80,000.
D) Luis's corporation must pay income tax on $80,000.
E) None of the above.
Q2) A corporation must file a Federal income tax return even if it has no taxable income for the year.
A)True
B)False
Q3) As a general rule, C corporations must use the cash method of accounting. However, under several exceptions to this rule (e.g., average annual gross receipts of $25 million or less for the most recent 3-year period), a C corporation can use the accrual method.
A)True
B)False
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Chapter 18: Corporations: Organization and Capital Structure
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Q1) Rita forms Finch Corporation by transferring land (basis of $125,000? fair market value of $750,000) which is subject to a mortgage of $375,000. Two weeks prior to incorporating Finch, Rita borrows $125,000 for personal purposes and gives the lender a second mortgage on the land. Finch Corporation issues stock worth $250,000 to Rita and assumes the two mortgages on the land. What are the tax consequences to Rita and to Finch Corporation?
Q2) Jane transfers property (basis of $180,000 and fair market value of $500,000) to Green Corporation for 80% of its stock (worth $425,000) and a long-term note (worth $75,000), executed by Green Corporation and made payable to Jane. As a result of the transfer:
A) Jane recognizes no gain.
B) Jane recognizes a gain of $75,000.
C) Jane recognizes a gain of $270,000.
D) Jane recognizes a gain of $320,000.
E) None of the above.
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
Page 20
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Chapter 19: Corporations: Distributions Not in Complete
Liquidation
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Q1) Christian, the president and sole shareholder of Venture Corporation, is paid an annual salary of $150,000. Christian would like to draw additional funds from the corporation but is concerned that increased salary might cause the IRS to contend his salary is unreasonable. Further, Christian does not want the corporation to pay any dividends. He would like to contribute $40,000 to his alma mater to establish scholarships for needy students. If Christian makes a pledge to the university to provide $40,000 for scholarships, would there be a problem if Venture Corporation paid the pledge on his behalf? Explain.
Q2) At the beginning of the current year, Paul and John each own 50% of Apple Corporation. In July, Paul sold his stock to Sarah for $110,000. At the beginning of the year, Apple Corporation had accumulated E & P of $200,000 and its current E & P is $250,000 (prior to any distributions). Apple distributed $260,000 on March 1 ($130,000 to Paul and $130,000 to John) and distributed another $260,000 on October 1 ($130,000 to Sarah and $130,000 to John). What are the tax implications of the $130,000 distribution to Sarah?
Q3) A corporation that distributes a property dividend must reduce its E & P by the adjusted basis of the property less any liability on the property.
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) If a liquidation qualifies under § 332, any minority shareholder will recognize gain or 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
Q2) The stock of Loon Corporation is held as follows: 85% by Duck Corporation and 15% by Gerald, an individual. Loon Corporation is liquidated in December of the current year, pursuant to a plan adopted earlier in the year. Loon Corporation distributes land with a basis of $350,000 and fair market value of $390,000 to Gerald in liquidation of his stock interest. Gerald had a basis of $200,000 in his Loon stock. How much gain will Loon Corporation recognize in this liquidating distribution?
A) $0
B) $40,000
C) $190,000
D) $390,000
E) None of the above
Q3) Explain why the antistuffing rules were enacted to limit the deductibility of losses realized by a corporation upon liquidation.
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Chapter 21: Partnerships
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Q1) Your client has operated a sole proprietorship for several years, and is now interested in raising capital for expansion. considering forming either a C corporation or an LLC.
a. Describe the treatment of an LLC and discuss any advantages the LLC offers over the C corporation.
b. Assume instead the client has previously operated as a C corporation. Describe the tax consequences of converting to an LLC.
Q2) Paul sells one parcel of land (basis of $100,000) for its fair market value of $160,000 to a partnership in which he owns a 60% capital interest. Paul held the land for investment purposes. The partnership is in the real estate development business, and will build residential housing (for sale to customers) on the land (the land is inventory to the partnership). Paul will recognize:
A) $0 gain or loss.
B) $36,000 ordinary income.
C) $36,000 capital gain.
D) $60,000 ordinary income.
E) $60,000 capital gain.
Q3) Startup costs
Q4) Limited liability company
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Page 23
Chapter 22: S Corporations
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Q1) The exclusion of gain on disposition of small business stock is not available on disposition of S corporation stock.
A)True
B)False
Q2) Compensation for services rendered to an S corporation is subject to FICA taxes.
A)True
B)False
Q3) The Section 179 expense deduction is a Schedule K item on the Form 1120S.
A)True
B)False
Q4) An S corporation cannot incur a tax liability at the corporation level.
A)True
B)False
Q5) Which, if any, of the following can be eligible shareholders of an S corporation?
A) A Roth IRA.
B) Partnership.
C) A non-U.S. corporation.
D) A nonqualifying trust.
E) None of the above can own stock.
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Chapter 23: Exempt Entities
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Q1) Rattler, Inc., an exempt organization, trains disabled individuals to design web pages. Rather than hold a traditional graduation exercise, the graduates compete in a web design contest. Such activities are held four times each year. An admission fee of $10 is charged to the general public to attend the contest. Eight hundred people attended the contest this year, and prizes of $2,000 were given to the top 3 graduates. Calculate the amount of Rattler's unrelated business income from this activity.
Q2) Which of the following exempt organizations are required to file Form 990 (Return of Organization Exempt from Income Tax)?
A) Federal agencies.
B) Churches.
C) Exempt organizations whose annual gross receipts do not exceed $50,000.
D) Private foundations.
E) None of these entities must file Form 990.
Q3) Branded calendars
Q4) What are the excise taxes imposed on private foundations, and why are they imposed?
Q5) Describe how an exempt organization can be eligible to make lobbying expenditures without losing its tax exemption.
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Chapter 24: Multistate Corporate Taxation
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Q1) General Corporation is taxable in a number of states. This year, General made a $100,000 sale from its A headquarters to a customer in B. This activity is not sufficient for General to create nexus with B. State A applies a throwback rule, but State B does not. In which state(s) will the sale be included in the sales factor numerator?
A) $0 in both A and B.
B) $100,000 in A.
C) $100,000 in B.
D) In both A and B, according to the apportionment formulas of each.
Q2) All of the U.S. states use an apportionment formula based on the sales, property, and payroll factors.
A)True
B)False
Q3) Computer equipment purchased by a charity.
Q4) A garment purchased by a self-employed actress.
Q5) A state might levy a(n) ________________ tax when an investor sells shares of stock.
Q6) Overall tax liabilities typically ________________ (increase/decrease) if the members of a unitary group begin to include affiliates that generate net operating losses.
Page 26
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Chapter 25: Taxation of International Transactions
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Q1) Peanut, Inc., a U.S. corporation, receives $500,000 of foreign-source interest income, on which foreign taxes of $5,000 are withheld. Peanut's worldwide taxable income is $900,000, and its U.S. Federal income tax liability before FTC is $270,000. What is Peanut's foreign tax credit?
A) $500,000
B) $275,000
C) $150,000
D) $5,000
Q2) Individual who is not a U.S. citizen or resident.
Q3) In allocating interest expense between U.S. and foreign sources, a taxpayer elects to use either the tax basis of the income-producing assets or their fair market values.
A)True
B)False
Q4) Under a territorial income tax system, a country assesses an income tax on:
A) Income of all entities earned within its borders.
B) Income of its citizens earned in other countries.
C) Both a. and b.
D) Neither a. nor b.
Q5) Foreign taxpayers earning income inside the United States.
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Chapter 26: Tax Practice and Ethics
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184 Verified Questions
184 Flashcards
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Sample Questions
Q1) Substantial understatement of tax liability.
Q2) The Treasury issues "private letter rulings" and other determinations, usually in response to a taxpayer request. What is the purpose of the rulings program? Answer from both the taxpayer and the government points of view.
Q3) Clarita underpaid her taxes by $50,000. Of this amount, $35,000 was due to negligence on her part, as her record- keeping system is highly inadequate. Determine the amount of any negligence penalty.
Q4) Juanita, who is subject to a 40% marginal Federal gift tax rate, made a gift of a sculpture to Bianca, valuing the property at $150,000. The IRS later valued the gift at $300,000. The applicable undervaluation penalty is:
A) $24,000.
B) $12,000.
C) $10,000 (maximum penalty).
D) $0.
Q5) The IRS pays interest on a refund to the taxpayer, unless the IRS's payment is made within________________ days of the date that a return is filed.
Q6) Fraudulent failure to file a tax return.
Q7) Failure to pay a tax that is due.
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Chapter 27: The Federal Gift and Estate Taxes
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141 Verified Questions
141 Flashcards
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Sample Questions
Q1) State income taxes accrued prior to death.
Q2) Walt dies intestate (i.e., without a will) in the current year with a gross estate valued at $4,000,000. Under applicable state law, Walt's property passes to Kelly or to Belle, in that order. Kelly has an estimated net worth of $3,000,000 while Belle's is zero. From a tax planning standpoint, what course of action might be advisable?
Q3) Murray owns an insurance policy on the life of his father, Logan. Upon Logan's death, the policy proceeds of $2,000,000 are paid to the designated beneficiary, Grace. What are the transfer tax consequences resulting from Logan's death, based on the following independent assumptions?
a. Grace is Murray's daughter.
b. Grace is Murray's wife.
c. What are the tax consequences if Murray dies first (i.e., predeceases both Grace and Logan)?
Q4) A husband and wife make a gift of their jointly owned vacation home to their adult children. The gift-splitting election must be made.
A)True
B)False
Q5) State income tax refund received after death on a tax return filed before death.
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Chapter 28: Income Taxation of Trusts and Estates
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161 Verified Questions
161 Flashcards
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Sample Questions
Q1) The tax rules regarding the income taxation of trusts and estates are included in which Subchapter of the Internal Revenue Code?
A) C
B) J
C) K
D) S
Q2) During the current year, the Santo Trust received $30,000 of taxable interest income, paid trustee's commissions of $3,000, and had no other income or expenses. The Santo trust instrument requires that $20,000 be paid annually to Marilyn, and $40,000 be paid annually to Domingo. How much gross income must Marilyn and Domingo recognize?
A) $20,000 by Marilyn and $40,000 by Domingo.
B) $15,000 by Marilyn and $15,000 by Domingo.
C) $13,500 by Marilyn and $13,500 by Domingo.
D) $9,000 by Marilyn and $18,000 by Domingo.
Q3) An estate's remainder beneficiary generally must wait until the entity is terminated by the executor to receive any distributions.
A)True
B)False
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