Graduate Taxation
Exam Solutions
Course Introduction
Graduate Taxation is an advanced course designed to provide a comprehensive understanding of the principles, regulations, and policies governing taxation at the federal, state, and local levels. The course covers topics such as income tax, corporate and partnership taxation, tax planning strategies, tax compliance, and the ethical considerations lawyers and accountants face in practice. Students will analyze complex tax issues through case studies and real-world scenarios, developing skills in tax research, interpretation of tax statutes, and application of tax laws to individuals and business entities. The course also examines recent developments and current issues in taxation, preparing students for professional roles in tax planning, consulting, and compliance.
Recommended Textbook
South Western Federal Taxation 2013 Comprehensive Edition by William H. Hoffman
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Page 2
Chapter 1: An Introduction to Taxation and Understanding
the Federal Tax Law
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Sample Questions
Q1) If the tax deficiency is attributable to fraud, the negligence penalty will not be imposed.
A)True
B)False
Answer: True
Q2) As a matter of administrative convenience, the IRS would prefer to have Congress increase (rather than decrease) the amount of the standard deduction allowed to individual taxpayers.
A)True
B)False
Answer: True
Q3) Which, if any, of the following provisions cannot be justified as mitigating the effect of the annual accounting period concept?
A)Nonrecognition of gain allowed for involuntary conversions.
B)Net operating loss carryback and carryover provisions.
C)Carry over of excess charitable contributions.
D)Use of the installment method to recognize gain.
E)Carry over of excess capital losses.
Answer: A
Page 3
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Chapter 2: Working With the Tax Law
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Q1) Which statement is not true with respect to a Treasury Regulation?
A)Issued by the U.S.Congress.
B)Issued as Treasury Decision.
C)Designed to provide interpretation of the tax law.
D)Carries more legal force than a Revenue Ruling.
E)All of the above statements are true.
Answer: A
Q2) Post-1984 letter rulings may be substantial authority for purposes of the accuracy-related penalty in § 6662.
A)True
B)False
Answer: True
Q3) Tax bills are handled by which committee in the U.S.House of Representatives?
A)Taxation Committee.
B)Ways and Means Committee.
C)Finance Committee.
D)Budget Committee.
E)None of the above.
Answer: B
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Page 4
Chapter 3: Computing the Tax
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Sample Questions
Q1) 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.
Q2) Merle is a widow, age 80 and blind, who is claimed as a dependent by her son.During 2012, she received $4,800 in Social Security benefits, $2,200 in bank interest, and $1,800 in cash dividends from stocks.Merle's taxable income is:
A)$4,000 - $950 - $2,900 = $150.
B)$4,000 - $2,900 = $1,100.
C)$4,000 - $950 - $1,450 = $1,600.
D)$8,800 - $950 - $2,900 = $4,950.
E)None of the above.
Answer: A
Q3) An "above the line" deduction refers to a deduction for AGI.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Gross Income: Concepts and Inclusions
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Sample Questions
Q1) 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 in the 28% 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.]
$59,669
Q2) The Purple & Gold Gym, Inc., uses the accrual method of accounting.The corporation sells memberships that entitle the member to use the facilities at any time.A one-year membership costs $360 ($360/12 = $30 per month); a two-year membership costs $600 ($600/24 = $25 per month).Cash payment is required at the beginning of the membership period. On July 1, 2012, the company sold a one-year membership and a two-year membership.The company should report as gross income from the two contracts:
A)$960 in 2012.
B)$0 in 2014.
C)$360 in 2012.
D)$480 in 2013.
E)None of the above.
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Chapter 5: Gross Income: Exclusions
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Q1) In December 2012, Emily, a cash basis taxpayer, received a $2,500 cash scholarship for the Spring semester of 2013. However, she did not use the funds to pay the tuition until January 2013.Emily can exclude the $2,500 from her gross income in 2012.
A)True
B)False
Q2) Kristen's employer owns its building and provides parking space for its employees. The value of the free parking is $150 per month. Karen's employer does not have parking facilities, but reimburses its employee for the cost of parking in a nearby garage, up to $150 per month.
A)Kristen and Karen must recognize gross income from the parking services.
B)Kristen can exclude the employer provided parking from gross income, but Karen must include her reimbursement in gross income.
C)Kristen must include the value of the employer provided parking from her gross income, but Karen can exclude her reimbursement from gross income.
D)Neither Kristen nor Karen is required to include the cost of parking in gross income.
E)None of the above.
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Chapter 6: Deductions and Losses: in General
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Q1) Which of the following is not a "trade or business" expense?
A)Interest on business indebtedness.
B)Property taxes on business property.
C)Parking ticket paid on business auto.
D)Depreciation on business property.
E)All of the above are "trade or business" expenses.
Q2) Abner contributes $1,000 to the campaign of the Tea Party candidate for governor, $750 to the campaign of the Tea Party candidate for senator, and $500 to the campaign of the Tea Party candidate for mayor.Can Abner deduct these political contributions?
Q3) Which of the following expenses associated with the illegal sale of whiskey (i.e., bootlegging) can be deducted?
A)Cost of goods sold.
B)Advertising.
C)Cost of delivery.
D)Only a.and c.
E)a., b., and c.
Q4) Kitty runs a brothel (illegal under state law) and has the following items of income and expense.What is the amount that she must include in taxable income from her operation?
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Chapter 7: Deductions and Losses: Certain Business
Expenses and Losses
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Sample Questions
Q1) A business bad debt is a debt unrelated to the taxpayer's trade or business either when it was created or when it became worthless.
A)True
B)False
Q2) Last year, Sarah (who files as single) had silverware worth $10,000 (basis $6,000) stolen from her home. Sarah's insurance company told her that her policy did not cover the theft. Sarah's other itemized deductions last year were $10,000. She had AGI of $30,000 last year. In August of the current year, Sarah's insurance company decided that Sarah's policy did cover the theft of the silverware and they paid Sarah $5,000. Determine the tax treatment of the $5,000 received by Sarah during the current year.
A)None of the $5,000 should be included in gross income.
B)$2,900 should be included in gross income.
C)$5,000 should be included in gross income.
D)Last year's return should be amended to include the $5,000.
E)None of the above.
Q3) A taxpayer may carry any NOL incurred back two years.
A)True
B)False
Q4) How is qualified production activities income (QPAI) calculated?
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Chapter 8: Depreciation, Cost Recovery, Amortization, and Depletion
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Sample Questions
Q1) 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
Q2) Carlos purchased an apartment building on November 16, 2012, for $3,000,000.Determine the cost recovery for 2012.
A)$9,630.
B)$11,910.
C)$13,950.
D)$22,740.
E)None of the above.
Q3) Which of the following assets would be subject to cost recovery?
A)A painting by Picasso hanging on a doctor's office wall.
B)An antique vase in a doctor's waiting room.
C)Stock in the doctor's LLC.
D)a., b., and c.
E)None of the above.
Q4) For real property, the ADS convention is the mid-month convention.
A)True
B)False
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Chapter 9: Deductions: Employee and Self-Employed
Related Expenses
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Q1) Dana contributes $2,000 too much to a § 401(k) plan which is not returned within 2 1/2 month after the close of the tax year. The employer will have to pay a tax of $200
A)True
B)False
Q2) Which, if any, of the following expenses is subject to the 2%-of-AGI floor?
A)Gambling losses (to the extent of gambling gains).
B)Moving expenses (not reimbursed by employer).
C)Teaching supplies (in excess of $250) purchased by a fifth grade teacher.
D)Union dues of self-employed machinist.
E)None of the above.
Q3) The Federal per diem rates that can be used for "deemed substantiated" purposes are not the same for all locations in the country.
A)True B)False
Q4) A taxpayer who uses the automatic mileage method for the business use of an automobile can change to the actual cost method in a later year.
A)True B)False
Page 11
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Chapter 10: Deductions and Losses: Certain Itemized
Deductions
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Q1) During 2012, Kathy, who is self-employed, paid $650 per month for an HSA contract that provides medical insurance coverage with a $3,000 deductible.The plan covers Kathy, her husband, and their three children.Of the $650 monthly fee, $300 was for the high-deductible policy, and $350 was deposited into an HSA.How much of the amount paid for the high-deductible policy can Kathy deduct as a deduction for AGI?
Q2) Sadie mailed a check for $2,200 to a qualified charitable organization on December 31, 2012.The $2,200 contribution is deductible on Sadie's 2012 tax return.
A)True B)False
Q3) Gambling losses may be deducted to the extent of the taxpayer's gambling winnings.Such losses are subject to the 2% floor for miscellaneous itemized deductions. A)True B)False
Q4) The phaseout of certain itemized deductions has been reinstated for years beginning in 2012. A)True B)False
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Chapter 11: Investor Losses
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Q1) Jack owns a 10% interest in a partnership (not real estate) in which his at-risk amount is $42,000 at the beginning of the year.During the year, the partnership borrows $80,000 on a nonrecourse note and incurs a loss of $60,000 from operations.Jack's at-risk amount at the end of the year is $44,000.
A)True
B)False
Q2) Gray Company, a closely held C corporation, incurs a $50,000 loss on a passive activity during the year.The company has active income of $34,000 and portfolio income of $24,000.If Gray is not a personal service corporation, it may deduct $34,000 of the passive loss.
A)True
B)False
Q3) In the current year, Kenny has a $35,000 loss from a real estate rental activity.Kenny provides 1,000 hours of service to that activity, which is more than half of his working hours for the year.Kenny can deduct the $35,000 loss.
A)True
B)False
Q4) Describe the general rules that limit the deduction of investment interest expense.
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Page 13
Chapter 12: Tax Credits and Payments
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Q1) In describing FICA taxes, which (if any) of the following statements is incorrect?
A)The base amounts for 2013 probably will increase from the 2012 amounts.
B)The base amounts for the Social Security and Medicare portions are the same.
C)If both spouses work, excess FICA taxes need not result.
D)Excess FICA taxes can be claimed as an income tax credit.
E)None of the above.
Q2) Cheryl is single, has one child (age 6), and files as head of household during 2012.Her salary for the year is $19,000.She qualifies for an earned income credit of the following amount:
A)$0.
B)$305.
C)$2,864.
D)$3,169.
E)None of the above.
Q3) All taxpayers are eligible to take the basic research credit.
A)True
B)False
Q4) Discuss the treatment of unused general business credits.
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Page 14
Chapter 13: Property Transactions: Determination of Gain or
Loss, Basis Considerations, and Nontaxable
Exchanges-Part 2
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Q1) What is the general formula for calculating the adjusted basis of property?
Q2) Discuss the logic for mandatory deferral of realized gain or loss for a § 1031 like-kind exchange.
Q3) What effect does a deductible casualty loss have on the adjusted basis of property?
Q4) Define qualified small business stock under § 1045.
Q5) Katrina, age 58, rented (as a tenant) the house that was her principal residence from January 1, 2012 through December 31, 2013.She purchased the house on January 1, 2014, for $150,000 and continued to occupy it through June 30, 2015.She leased it to a tenant from July 1, 2015, through December 31, 2016.On January 1, 2017, she sells the house for $350,000.She incurs a realtor's commission of $20,000.Calculate her recognized gain if her objective is to minimize the recognition of gain and she does not intend to acquire another residence.
Q6) Butch sells land with an adjusted basis of $88,000 and a fair market value of $160,000 to Cynthia, his wife, for $160,000.Discuss how the tax consequences would differ if Butch and Cynthia had never been married.
Q8) Define fair market value as it relates to property transactions. Page 15
Q7) Discuss the treatment of losses from involuntary conversions.
Q9) Discuss the treatment of realized gains from involuntary conversions.
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Chapter 13: A: Property Transactions: Determination
of
or Loss, Basis Considerations, and Nontaxable Exchanges-Part 1
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Q1) Which of the following statements is false?
A)A realized gain that is never recognized results in the temporary recovery of more than the taxpayer's cost or other basis for tax purposes.
B)A realized gain on which recognition is postponed results in the temporary recovery of more than the taxpayer's cost or other basis for tax purposes.
C)A realized loss that is never recognized results in the permanent recovery of less than the taxpayer's cost or other basis for tax purposes.
D)A realized loss on which recognition is postponed results in the temporary recovery of less than the taxpayer's cost or other basis for tax purposes.
E)All of the above.
Q2) The maximum amount of the § 121 gain exclusion on sale of a principal residence is $250,000 for a single individual and $500,000 for a married couple.
A)True
B)False
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Chapter 14: Property Transactions: Capital Gains and
Losses, 1231, Recapture Provisions
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Q1) When an individual taxpayer has a net long-term capital gain that includes both 25% gain and 0%/15% gain, which of these gains will be taxed first when the alternative tax on net long-term capital gain method is used and what difference does it make?
Q2) Depreciation recapture under § 1245 and § 1250 is reported on Form 4797.
A)True
B)False
Q3) What characteristics must the seller of a patent have in order to be classified as a holder?
Q4) A security that is a capital asset becomes worthless.The loss is deemed to have occurred on the day that the security was declared worthless. A)True B)False
Q5) A personal use property casualty loss is generally deductible only to the extent it exceeds 10% of AGI.
A)True B)False
Q6) Describe the circumstances in which the potential § 1245 depreciation recapture is extinguished.
Page 18
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Chapter 15: Alternative Minimum Tax
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Q1) The deduction for charitable contributions in calculating the regular income tax can differ from that in calculating the AMT because the percentage limitations (20%, 30%, and 50%) may be applied to a different base amount.
A)True
B)False
Q2) The C corporation AMT rate can be higher than the individual AMT rates.
A)True
B)False
Q3) Keosha acquires 10-year personal property to use in her business in 2012 and takes the maximum cost recovery deduction for regular income tax purposes. As a result of this, Keosha will have a positive AMT adjustment in 2012.
A)True
B)False
Q4) The AMT does not apply to qualifying "small corporations."
A)True
B)False
Q5) How can the positive AMT adjustment for research and experimental expenditures be avoided?
Q6) Why is there no AMT adjustment for charitable contributions?
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Chapter 16: Accounting Periods and Methods
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Q1) Taylor sold a capital asset on the installment basis and did not charge interest on the deferred payment due in three years.
A)Interest will be imputed, thus increasing the total gross income from the transactions.
B)Interest will be imputed, thus decreasing the capital gain.
C)Interest will not be imputed because the contract is for less than five years.
D)Interest will be imputed, thus increasing the buyer's basis in the asset.
E)None of the above.
Q2) Computer Consultants Inc., began business as an adviser to chains of retail stores.The company assisted the stores in the selection of hardware and the development of software used by retail chain stores.Later the company developed software and sold it to its customers.The company also began selling some of the equipment to the customers.That is, the company would bid on a job to purchase and install equipment and the software.The company has consistently reported its income by the cash method.At the end of the year, the company has substantial accounts receivables from clients and a small amount of inventory on hand.What advice can you offer the company regarding its accounting method?
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Page 20
Chapter 17: Corporations: Introduction and Operating Rules
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Q1) In 2012, Bluebird Corporation had net income from operations of $75,000. Further, Bluebird recognized a long-term capital loss of $30,000, and a short-term capital gain of $10,000. Which of the following statements is correct?
A)Bluebird Corporation may use the capital loss to offset the capital gain and must carry the net capital loss of $20,000 forward five years as a long-term capital loss.
B)Bluebird Corporation may deduct $13,000 of the capital loss in 2012 and may carry forward the remainder of the capital loss indefinitely to offset capital gains.
C)Bluebird Corporation will have taxable income in 2012 of $55,000.
D)Bluebird Corporation will have taxable income in 2012 of $75,000 and will have a net capital loss of $20,000 that can be carried back 3 years and forward 5 years.
E)None of the above.
Q2) Discuss the purpose of Schedule M-1.Give two examples of an addition and two examples of a subtraction that could be reported on Schedule M-1.
Q3) What is the annual required estimated tax payment for a C corporation? What are the rules regarding payment of the estimated tax?
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Chapter 18: Corporations: Organization and Capital Structure
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Q1) Tara incorporates her sole proprietorship, transferring it to newly formed Black Corporation.The assets transferred have an adjusted basis of $240,000 and a fair market value of $300,000.Also transferred was $10,000 in liabilities, $1,000 of which was personal and the balance of $9,000 being business related.In return for these transfers, Tara receives all of the stock in Black Corporation.
A)Black Corporation has a basis of $241,000 in the property.
B)Black Corporation has a basis of $240,000 in the property.
C)Tara's basis in the Black Corporation stock is $241,000.
D)Tara's basis in the Black Corporation stock is $249,000.
E)None of the above.
Q2) Carmen and Carlos form White Corporation. Carmen transfers cash of $100,000 for 100 shares in White. Carlos transfers property (basis of $20,000 and fair market value of $80,000) and agrees to serve as manager of White Corporation for one year; in return, Carlos receives 100 shares in White. The value of Carlos's services is $20,000. White Corporation can deduct $20,000 as compensation expense for the value of the services Carlos will render.
A)True
B)False
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Chapter 19: Corporations: Distributions Not in Complete
Liquidation
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Q1) Lupe and Rodrigo, father and son, each own 50% of the stock outstanding of Heron Corporation (E & P of $400,000). During the current year, Heron redeems all of Lupe's shares for $250,000. The transaction cannot qualify as a complete termination redemption if:
A)Three years after the redemption, Lupe receives shares of stock in Heron as a gift from Rodrigo.
B)Lupe received a $250,000 note receivable from Heron in the stock redemption.
C)Lupe loaned Heron Corporation $50,000 two years following the redemption.
D)Rodrigo continued to serve on Heron Corporation's board of directors for five years following the redemption.
E)More than one of the above is correct.
Q2) How does the definition of accumulated E & P differ from the definition of current E & P?
Q3) Certain dividends from foreign corporations can be qualified dividends for purposes of the 15% rate available to individuals.
A)True
B)False
Q4) Explain the stock attribution rules that apply in the case of stock redemptions.
Q5) When is a redemption to pay death taxes under § 303 most advantageous?
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Chapter 20: Corporations: Distributions in Complete
Liquidation and an Overview of Reorganizations
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Q1) What are the tax consequences of a § 332 liquidation to the parent corporation, subsidiary corporation, and minority shareholder?
Q2) For a corporate restructuring to qualify as a tax-free reorganization, the transaction must have a sound business purpose.
A)True
B)False
Q3) Section 332 does not apply to a parent-subsidiary liquidation if the subsidiary corporation is insolvent on the date of the liquidation.
A)True
B)False
Q4) A subsidiary is liquidated pursuant to § 332. The parent has held 100% of the stock in the subsidiary for the past ten years. The subsidiary has a net operating loss carryover of $400,000. The net operating loss does not carry over to the parent.
A)True
B)False
Q5) Compare the sale of a corporation's assets with a sale of its stock from the perspective of the seller.
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Chapter 21: Partnerships
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Q1) On a partnership's Form 1065, which of the following statements is not true?
A)The partnership reconciles its net income (including separately stated items) to book income on Schedule M-1 or M-3.
B)The partnership balance sheet on Schedule L is generally presented on a financial (book) basis.
C)All partnership income and expense items are reported on Form 1065, page 1.
D)The partnership's equivalent of taxable income is reported in the "Analysis of Income (Loss)."
E)None of the above statements are true.
Q2) A partnership has accounts receivable with a basis of $0 and a fair market value of $20,000 and depreciation recapture potential of $30,000.All other assets of the partnership are either cash, capital assets, or § 1231 assets.If a purchaser acquires a 40% interest in the partnership from another partner, the selling partner will be required to recognize ordinary income of $20,000.
A)True
B)False
Q3) The "outside basis" is defined as a partner's basis in the partnership interest.
A)True
B)False
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Page 25
Chapter 22: S: Corporations
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Q1) An S corporation may not have a ____________________ alien shareholder.
Q2) An S shareholder who dies during the corporate tax year must report his or her share of the pro rata income (or loss) up to the date of death on the final individual tax return.
A)True
B)False
Q3) No maximum or minimum dollar sales or capitalization restrictions apply to S corporations.
A)True
B)False
Q4) Distributions of which assets during an S corporation's post-termination period receive favorable income tax treatment?
A)Cash.
B)Investment portfolio.
C)Real estate.
D)Notes receivable.
Q5) Advise your client how income, expenses, gain, and losses are allocated to shareholders of an S corporation.
Q6) Tax-exempt income is listed on Schedule ____________________ of Form 1120S.
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Chapter 23: Exempt Entities
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Q1) Wett, Inc., a § 501(c)(3) exempt organization, acquired all the stock of a for-profit corporation for $150,000.Wett is a private foundation.The acquired corporation was not a related business.Calculate the tax on excess business holdings.Assume that corrective action is taken so that the additional tax does not apply.
Q2) Engaging in a prohibited transaction can result in an exempt organization being subject to Federal income tax, but cannot cause it to lose its exempt status unless the exempt organization repeats the prohibited transaction.
A)True
B)False
Q3) Lemon, Inc., a private foundation, engages in a transaction with a disqualified person in the amount of $300,000.Calculate the tax on self-dealing.Assume that corrective action is taken so that the additional tax does not apply.
Q4) Federal agencies exempt from Federal income tax under § 501(c)(1) are not subject to the unrelated business income tax (UBIT).
A)True
B)False
Q5) What is the purpose of the unrelated business income tax?
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Chapter 24: Multistate Corporate Taxation
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Q1) Typically included in the sales/use tax base is the purchase of computer and cell phone equipment by a large consulting firm that is incorporated in the state.
A)True
B)False
Q2) The use tax is designed to complement the sales tax.A use tax typically covers purchases made out of state and brought into the jurisdiction.
A)True
B)False
Q3) Apportionment is a means by which a corporation's _________________________ income is divided among the states in which it conducts business.
Q4) A state or local tax on a corporation's income might be called a franchise tax or a business privilege tax.
A)True
B)False
Q5) Discuss how a multistate business divides up its corporate taxable income among the states in which it operates. Hint: use the terms allocation and apportionment in your comments.
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Chapter 25: Taxation of International Transactions
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Q1) Flapp Corporation, a domestic corporation, conducts all of its transactions in the U.S.dollar.It sells inventory for $1 million to a Canadian company when the exchange rate is $1US: $1.2Can.The Canadian company pays for the inventory when the exchange rate is $1US: $1.25Can.What is Flapp's exchange gain or loss on this sale?
A)Flapp does not have a foreign currency exchange gain or loss, since it conducts all of its transactions in the U.S.dollar.
B)Flapp's account receivable for the sale is $1 million (when the exchange rate is $1US: $1.2Can.) and it collects on the receivable when the exchange rate is $1US: $1.25Can.Flapp has an exchange gain of $50,000.
C)Flapp's account receivable for the sale is $1 million (when the exchange rate is $1US: $1.2Can.).It collects on the receivable at $1US: $1.25Can.Flapp has an exchange loss of $5,000.
D)Flapp's foreign currency exchange loss is $50,000.
Q2) An advance pricing agreement (APA) is used between:
A)Two or more governments.
B)Two related taxpayers.
C)The taxpayer and the IRS.
D)The IRS and U.S.taxing authorities.
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29
Chapter 26: Tax Practice and Ethics
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Q1) In connection with the taxpayer penalty for substantial understatement of tax liability, what defenses (if any) are available?
Q2) The tax ____________________ workpapers are not privileged communications that can be kept confidential from an IRS subpoena.
Q3) Which of the following statements correctly reflects the rules governing interest to be paid on an individual's Federal tax deficiency or claim for refund?
A)The IRS has full discretion in determining the rate that will apply.
B)The simple interest method for calculating interest is used.
C)IRS interest compounds daily.
D)Congress sets the IRS interest rate twice each year.
Q4) If the taxpayer shows ____________________ for an underpayment of tax, the failure to pay penalty can be reduced or eliminated.
Q5) Keepert uses "two sets of books." She only reports one-half of her cash sales on the records that she uses to complete her Federal income tax return. The statute of limitations for Keepert's return is six years.
A)True
B)False
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Page 30
Chapter 28: Income Taxation of Trusts and Estates
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Q1) In computing Federal taxable income, can the trust or estate use its distributable net income (DNI) as its deduction for distributions to beneficiaries? Explain.
Q2) Consider the term fiduciary accounting income as it is used with respect to the Federal income taxation of trusts and estates. How is this amount computed? Where is it used in computing the parties' taxable incomes?
Q3) Harry, the sole income beneficiary, received a $40,000 distribution from the Lucy Trust, in a year when the trust's distributable net income was $30,000.Harry's AGI can increase by as much as $40,000.
A)True
B)False
Q4) The first step in computing an estate's taxable income is the determination of its gross income for the year.
A)True B)False
Q5) Generally, an estate's taxable income is computed in a manner similar to that used for a(n) ____________________.
Q6) The Form 1041 of a calendar-year trust is due on ____________________ 15.
Q7) Every ____________________ trust is allowed a $300 personal exemption.
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