Taxation of Estates and Trusts
Test Preparation
Course Introduction
This course provides an in-depth examination of the federal income taxation of estates and trusts, including the computation of taxable income, the allocation of income, deductions, and credits between entities and beneficiaries, and the filing requirements for fiduciary tax returns. Students will explore the fundamentals of trust and estate law, the roles and responsibilities of fiduciaries, and the special rules governing distributions and taxable events. The course also addresses estate and gift tax principles, planning strategies for minimizing tax liability, and the impact of recent legislative developments. Practical problems and case studies are used to reinforce concepts and facilitate a comprehensive understanding of taxation in this area.
Recommended Textbook
South Western Federal Taxation 2018 Comprehensive 41st Edition by William H. Hoffman
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28 Chapters
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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) The value added tax (VAT) has not had wide acceptance in the international community.
A)True
B)False
Answer: False
Q2) On transfers by death,the Federal government relies on an estate tax,while states impose an estate tax,an inheritance tax,both taxes,or neither tax.
A)True
B)False
Answer: True
Q3) Under state amnesty programs,all delinquent and unpaid income taxes are forgiven.
A)True
B)False
Answer: False
Q4) "Pay-as-you-go" (paygo)
Answer: g
Q5) Criminal fraud penalty
Answer: l
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Chapter 2: Working With the Tax Law
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Sample Questions
Q1) Post-1984 letter rulings may be substantial authority for purposes of the accuracy-related penalty in § 6662.
A)True
B)False
Answer: True
Q2) Revenue Rulings issued by the National Office of the IRS carry the same legal force and effect as Regulations.
A)True
B)False
Answer: False
Q3) Subtitle A of the Internal Revenue Code covers which of the following taxes?
A)Income taxes
B)Estate and gift taxes
C)Excise taxes
D)Employment taxes
E)All of these
Answer: A
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Chapter 3: Computing the Tax
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Sample Questions
Q1) Nelda is married to Chad,who abandoned her in early June of 2017.She has not seen or communicated with him since then.She maintains a household in which she and her two dependent children live.Which of the following statements about Nelda's filing status in 2017 is correct?
A)Nelda can use the rates for single taxpayers.
B)Nelda can file a joint return with Chad.
C)Nelda can file as a surviving spouse.
D)Nelda can file as a head of household.
E)None of these statements is appropriate.
Answer: D
Q2) Long-term capital gains
Answer: i
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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Page 5
Chapter 4: Gross Income: Concepts and Inclusions
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Sample Questions
Q1) Office Palace,Inc.,leased an all-in-one printer to a new customer,Ashley,on December 27,2017.The printer was to rent for $600 per month for a period of 36 months beginning January 1,2018.Ashley was required to pay the first and last month's rent at the time the lease was signed.Ashley was also required to pay a $1,500 damage deposit.Office Palace must recognize as income for the lease:
A)$0 in 2017, if Office Palace is an accrual basis taxpayer.
B)$7,800 in 2018, if Office Palace is a cash basis taxpayer.
C)$2,700 in 2017, if Office Palace is a cash basis taxpayer.
D)$1,200 in 2017, if Office Palace is an accrual basis taxpayer.
E)None of these.
Q2) When stock is sold after the date of declaration but before the record date,the buyer must recognize as income the dividend declared.
A)True
B)False
Q3) In the case of a person with other income of $300,000,15% of his or her Social Security benefits received are excluded from gross income.
A)True
B)False
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Chapter 5: Gross Income: Exclusions
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Sample Questions
Q1) Emily is in the 35% marginal tax bracket.She can purchase a York County school bond yielding 3.5%
Interest and the interest is not subject to a 5% state tax.But she is interested in earning a higher return
For comparable risk.Which of the following is correct:
A)If she buys a corporate bond that pays 6% interest, her after-tax rate of return will be less than ifshe purchased the York County school bond.
B)If she buys a U.S. government bond paying 5%, her after-tax rate of return will be less than ifshe purchased the York County school bond.
C)If she buys a common stock paying a 4% dividend, her after-tax rate of return will be higherthan if she purchased the York County school bond.
D)All of these are correct.
E)None of these are correct.
Q2) What Federal income tax benefits are provided for college students?
Q3) What are the tax problems associated with payments received by a wife from her deceased husband's employer? (Assume the wife renders no services to the employer.)
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Page 7
Chapter 6: Deductions and Losses: in General
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Sample Questions
Q1) Purchased goodwill must be capitalized,but can be amortized over a 60-month period.
A)True
B)False
Q2) If a vacation home is classified as primarily personal use (i.e.,rented for fewer than 15 days),none of the related expenses can be deducted.
A)True
B)False
Q3) The amount of the addition to the reserve for bad debts for an accrual method taxpayer is allowed as a deduction for tax purposes,but is not allowed for a cash method taxpayer.
A)True
B)False
Q4) Bobby operates a drug trafficking business.Because he has an accounting background,he keeps detailed financial records.What expenses can Bobby deduct on his Federal income tax return?
Q5) The legal cost of having a will prepared is not deductible. A)True
B)False
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Chapter 7: Deductions and Losses: Certain Business
Expenses and Losses
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Sample Questions
Q1) If the amount of the insurance recovery for a theft of business property is greater than the asset's fair market value but less than its adjusted basis,a gain is recognized.
A)True
B)False
Q2) A loss from a worthless security is always treated as a short-term capital loss.
A)True
B)False
Q3) The amount of partial worthlessness on a nonbusiness bad debt is deducted in the year partial worthlessness is determined.
A)True
B)False
Q4) 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
Q5) A taxpayer can carry any NOL incurred forward up to 20 years.
A)True
B)False
9
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Chapter 8: Depreciation, cost Recovery, amortization, and Depletion
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Sample Questions
Q1) Property which is classified as personalty may be depreciated.
A)True
B)False
Q2) Alice purchased office furniture on September 20,2016,for $100,000.On October 10,2016,she purchased business computers for $80,000.Alice placed all of the assets in service on January 15,2017.Alice did not elect to expense any of the assets under § 179,did not elect straight-line cost recovery,and did not take additional first-year depreciation.Determine the cost recovery deduction for the business assets for 2017.
A)$6,426
B)$14,710
C)$25,722
D)$30,290
E)None of the above
Q3) Once the more-than-50% business usage test is passed for listed property,it still matters if the business usage for the property drops to 50% or less during the recovery period.
A)True
B)False
Page 10
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Chapter 9: Deductions: Employee and
Self-Employed-Related Expenses
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Sample Questions
Q1) Dave is the regional manager for a national chain of auto-parts stores and is based in Salt Lake City.When the company opens new stores in Boise,Dave is given the task of supervising their initial operation.For three months,he works weekdays in Boise and returns home on weekends.He spends $350 returning to Salt Lake City but would have spent $410 had he stayed in Boise for the weekend.As to the weekend trips,how much,if any,qualifies as a deduction?
A)$0, since the trips are personal and not work related.
B)$0, since Dave's tax home has changed from Salt Lake City to Boise.
C)$60
D)$350
E)$410
Q2) Education expense that is not deductible to maintain or improve existing skills
Q3) The § 222 deduction for tuition and related expenses is available:
A)Only if the taxpayer itemizes deductions from AGI.
B)To deduct that portion of the tuition in excess of that allowed under the lifetime learning credit.
C)To cover the tuition of a son who does not qualify as taxpayer's dependent.
D)Only if job related.
E)None of these.
Q4) Deemed substantiation
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Chapter 10: Deductions and Losses: Certain Itemized
Deductions
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Sample Questions
Q1) Your friend Scotty informs you that he received a "tax-free" reimbursement in 2017 of some medical expenses he paid in 2016.Which of the following statements best explains why Scotty is not required to report the reimbursement in gross income?
A)Scotty itemized deductions in 2016.
B)Scotty did not itemize deductions in 2016.
C)Scotty itemized deductions in 2017.
D)Scotty did not itemize deductions in 2017.
E)Scotty itemized deductions in 2017 but not in 2016.
Q2) Maria traveled to Rochester,Minnesota,with her son,who had surgery at the Mayo Clinic.Her son stayed at the clinic for the duration of his treatment.She paid airfare of $300 and $50 per night for lodging.The cost of Maria's airfare and lodging cannot be included in determining her medical expense deduction.
A)True
B)False
Q3) Points paid by the owner of a personal residence to refinance an existing mortgage must be capitalized and amortized over the life of the new mortgage.
A)True
B)False
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Chapter 11: Investor Losses
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Sample Questions
Q1) Tonya owns an interest in an activity (not real estate) that converted recourse financing to nonrecourse financing.Recapture of previously allowed losses is required if Tonya's at-risk amount is reduced below zero as a result of the debt restructuring.
A)True
B)False
Q2) In 2017,Emily invests $120,000 in a limited partnership that is not a passive activity.During 2017,her share of the partnership loss is $90,000.In 2018,her share of the partnership loss is $50,000.How much can Emily deduct in 2017 and 2018?
Q3) Josie,an unmarried taxpayer,has $155,000 in salary,$10,000 in income from a limited partnership,and a $26,000 passive activity loss from a real estate rental activity in which she actively participates.If her modified adjusted gross income is $155,000,how much of the $26,000 loss is deductible?
A)$0
B)$10,000
C)$25,000
D)$26,000
E)None of the above
Q4) Treatment of a disposition of a passive activity at death.
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Page 13
Chapter 12: Tax Credits and Payments
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Q1) Which of the following statements concerning the credit for child and dependent care expenses is not correct?
A)A taxpayer is not allowed both an exclusion from income and the credit for child and dependent care expenses on the same amount.
B)A taxpayer is not allowed both a deduction as a medical expense and the credit for child and dependent care expenses on the same amount.
C)If a taxpayer's adjusted gross income exceeds $43,000, the rate for the credit for child and dependent care expenses is 20%.
D)If a taxpayer's adjusted gross income exceeds $15,000 but is not over $17,000, the rate for the credit for child and dependent care expenses is 35%.
E)All of the above statements are correct.
Q2) The work opportunity tax credit is available only for wages paid to qualifying individuals during their first year of employment.
A)True
B)False
Q3) Discuss the treatment of unused general business credits.
Q4) Describe the withholding requirements applicable to employers.
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Chapter 13: Property Transactions: Determination of Gain or
Loss, basis Considerations, and Nontaxable Exchanges
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Q1) To qualify for the § 121 exclusion,the property must have been used by the taxpayer for the 5 years preceding the date of sale and owned by the taxpayer as the principal residence for the last 2 of those years.
A)True
B)False
Q2) A factory building owned by Amber,Inc.is destroyed by a hurricane.The adjusted basis of the building was $400,000 and the appraised value was $425,000.Amber receives insurance proceeds of $390,000.A factory building is constructed during the nine-month period after the hurricane at a cost of $450,000.What is the recognized gain or loss and what is the basis of the new factory building?
A)$0 and $450,000.
B)$0 and $460,000.
C)($10,000) and $440,000.
D)($10,000) and $450,000.
E)None of the above.
Q3) Distinguish between a direct involuntary conversion and an indirect involuntary conversion.
Q4) What effect does a deductible casualty loss have on the adjusted basis of property?
Page 15
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Chapter 14: Property Transactions, capital Gains and
Losses, sec1231, and Recapture Provisions
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Sample Questions
Q1) An accrual basis taxpayer accepts a note receivable from a retail customer with a weak credit rating.The taxpayer immediately sells the note to a bank for less than the note's stated value.The taxpayer has an ordinary loss.
A)True
B)False
Q2) Tom has owned 40 shares of Orange Corporation stock for five years.He sells the stock short for a total of $1,100.One month later,he closes the short sale by purchasing and delivering 40 shares of Orange Corporation stock for a total of $600.Tom has a $500 short-term capital gain.
A)True
B)False
Q3) If the holder of an option fails to exercise the option,the lapse of the option is considered a sale or exchange on the option expiration date.
A)True
B)False
Q4) If a capital asset is sold at a gain,the holding period is important.
A)True
B)False
Page 16
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Chapter 15: Alternative Minimum Tax
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Q1) Cher sold undeveloped land that originally cost $150,000 for $225,000.There is a positive AMT adjustment of $75,000 associated with the sale of the land.
A)True
B)False
Q2) AMT adjustments can be positive or negative,whereas AMT preferences are always positive.
A)True
B)False
Q3) For individual taxpayers,the AMT credit is applicable for the AMT that results from timing differences,but it is not available for the AMT that results from the adjustment for itemized deductions or exclusion preferences.
A)True
B)False
Q4) Melinda is in the 35% marginal regular tax bracket.She reports a net capital gain of $150,000 on the sale of land which is eligible for the lower tax on net capital gain in calculating the regular income tax.Discuss the tax rate that applies to the $150,000 net capital gain in calculating the tentative minimum tax (TMT) for Melinda.
Q5) What is the relationship between the regular income tax liability and the TMT?
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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) Karen,an accrual basis taxpayer,sold goods in December 2017 for $20,000.The customer was unable to pay cash.So the customer gave Karen a note for $20,000 that was payable in April 2018.The note bore interest at the Federal rate.The fair market value of the note at the end of 2017 was $18,000.Karen collected $20,500 from the customer in April 2018,$20,000 principal plus $500 interest.Under the accrual method,Karen must recognize income of:
A)$20,500 in 2018.
B)$18,000 in 2017 and $2,500 in 2018.
C)$20,000 in 2017 and $500 in 2018.
D)$20,500 in 2018
E)None of the above.
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Chapter 17: Corporations: Introduction and Operating Rules
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Q1) Canary Corporation,an accrual method C corporation,uses the calendar year for tax purposes.Leticia,a cash method taxpayer,is both a shareholder of Canary and the corporation's CFO.On December 31,2017,Canary has accrued a $75,000 bonus to Leticia.Describe the tax consequences of the bonus to Canary and to Leticia under the following independent situations.
a.Leticia owns 35% of Canary Corporation's stock and the corporation pays the bonus to Leticia on February 2, 2018.
b.Leticia owns 75% of Canary Corporation's stock and the corporation pays the bonus to Leticia on May 4, 2018.
c.Leticia owns 75% of Canary Corporation's stock and the corporation pays the bonus to Leticia on April 12, 2018.
Q2) On December 31,2017,Flamingo,Inc.,a calendar year,accrual method C corporation,accrues a bonus of $50,000 to its president (a cash basis taxpayer),who owns 75% of the corporation's outstanding stock.The $50,000 bonus is paid to the president on February 2,2018.For Flamingo's 2017 Form 1120,the $50,000 bonus will be a subtraction item on Schedule M-1.
A)True
B)False
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Page 19
Chapter 18: Corporations: Organization and Capital Structure
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Q1) In order to induce Yellow Corporation to build a new manufacturing facility in Knoxville,Tennessee,the city donates land (fair market value of $400,000) and cash of $100,000 to the corporation.Several months after the donation,Yellow Corporation spends $450,000 (which includes the $100,000 received from Knoxville) on the construction of a new plant located on the donated land.
A)Yellow recognizes income of $100,000 as to the donation.
B)Yellow has a zero basis in the land and a basis of $450,000 in the plant.
C)Yellow recognizes income of $500,000 as to the donation.
D)Yellow has a zero basis in the land and a basis of $350,000 in the plant.
E)None of the above.
Q2) Lark City donates land worth $300,000 and cash of $100,000 to Orange Corporation as an inducement to locate in the city.Four months later,Orange purchases additional land and a building at a cost of $500,000 and moves its operations to Lark City.Ann,the sole shareholder,contributes equipment (basis of $70,000 and fair market value of $200,000) to help Orange in its new operations.What are the tax consequences of these transfers to Orange Corporation?
Q3) What is the rationale underlying the tax deferral treatment available under § 351?
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Page 20
Chapter 19: Corporations: Distributions Not in Complete
Liquidation
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Q1) Last year,Crow Corporation acquired land in a transaction that qualified under § 351.The land had a basis of $400,000 to the contributing shareholder and a fair market value of $310,000.Assume that the shareholder also transferred equipment (basis of $100,000,fair market value of $200,000) in the same § 351 exchange.In the current year,Crow Corporation adopted a plan of liquidation and distributes the land to Ali,a shareholder who owns 20% of the stock in Crow Corporation.The land's fair market value was $230,000 on the date of the distribution to Ali.Crow Corporation acquired the land to use as security for a loan it had hoped to obtain from a local bank.In negotiating with the bank for a loan,the bank required the additional capital investment as a condition of its making a loan to Crow Corporation.How much loss can Crow Corporation recognize on the distribution of the land?
A)$0
B)$80,000
C)$90,000
D)$170,000
E)None of the above
Q2) Briefly describe the reason a corporation might distribute a property dividend to a shareholder in lieu of a cash distribution.Describe the tax effects of the property distribution on the shareholder and on the corporation.
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Chapter 20: Corporations: Distributions in Complete
Liquidation and an Overview of Reorganization
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Q1) The stock in Toucan Corporation is held equally by two brothers.Four years ago,the shareholders transfer property (basis of $200,000,fair market value of $220,000) to Toucan Corporation as a contribution to capital.In the current year and pursuant to a complete liquidation of Toucan,the property is distributed proportionately to the brothers.At the time of the distribution,the property had a fair market value of $40,000.What amount of loss will Toucan Corporation recognize on the distribution of the property?
A)$0
B)$20,000
C)$160,000
D)$180,000
E)None of the above
Q2) In corporate reorganizations,if an acquiring corporation is using property other than stock as consideration,it may recognize gains but not losses on the transaction.
A)True
B)False
Q3) What are the tax consequences of a § 332 liquidation to the parent corporation,subsidiary corporation,and minority shareholder?
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Chapter 21: Partnerships
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Q1) Molly is a 30% partner in the MAP Partnership.During the current tax year,the partnership reported ordinary income of $200,000 before payment of guaranteed payments and distributions to partners.The partnership made an ordinary cash distribution of $20,000 to Molly,and paid guaranteed payments to partners Molly,Amber,and Pat of $20,000 each ($60,000 total guaranteed payments).How much will Molly's adjusted gross income increase as a result of the above items?
A)$42,000
B)$60,000
C)$62,000
D)$80,000
Q2) A limited partnership (LP) offers all partners protection from claims by the LP's creditors.
A)True
B)False
Q3) On a corporate Form 1120,Schedule M-1 (or M-3) is used to reconcile book and tax income,and Schedule M-2 reconciles retained earnings to the amounts shown on Schedule L.How are these reconciliations accomplished on a partnership return? What additional information must be provided?
Q4) Economic effect test
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Chapter 22: S Corporations
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Q1) On January 2,2016,David loans his S corporation $10,000.By the end of 2016 David's stock basis is zero and the basis in his note has been reduced to $8,000.During 2017,the company's operating income is $10,000.The company makes 2017 distributions to David of $11,000.David reports a(n):
A)$1,000 LTCG.
B)$3,000 LTCG.
C)$11,000 LTCG.
D)Loan basis of $10,000.
Q2) The LIFO recapture tax is a variation of the passive investment income penalty tax.
A)True B)False
Q3) If a resident alien shareholder moves outside the U.S.,the S election is terminated. A)True B)False
Q4) Realized gain is recognized by an S corporation on its distribution of ____________________ property.
Q5) Non-separately computed loss ____________________ a S shareholder's stock basis.
Q6) Depreciation recapture income is a ____________________ computed amount.
Page 24
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Chapter 23: Exempt Entities
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Q1) Restful,Inc.,a § 501(c)(3) exempt organization,hires a registered lobbyist to promote its position on pending legislation.For the year,its lobbying expenses are $100,000.Restful makes the § 501(h) election.The lobbying nontaxable amount is $90,000.
a.Will the lobbying expenses result in Restful losing its exempt status?
b.Calculate the amount of any tax that Restful must pay associated with the lobbying expenses.
Q2) Some of the excise taxes which may be imposed on private foundations may be imposed on both the private foundation and the foundation manager.
A)True
B)False
Q3) Private foundation
Q4) Form 990
Q5) What are intermediate sanctions and to what types of exempt organizations do they apply?
Q6) § 501(c)(3) organization
Q7) Which requirements must be satisfied for an exempt organization to be classified as an unrelated trade or business? Is being classified as an unrelated trade or business good or bad?
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Chapter 24: Multistate Corporate Taxation
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Q1) Training administrative personnel to use an update to ordering software.
Q2) Checking the customer's inventory to determine whether a reorder is needed.
Q3) An ad valorem property tax is based on the asset's current ____________________.
Q4) In determining a corporation's taxable income for state income tax purposes,which of the following does not constitute a subtraction from Federal income?
A)Interest on U.S. obligations.
B)Expenses that are directly or indirectly related to state and municipal interest that is taxable for state purposes.
C)The amount by which the state depreciation deduction exceeds the corresponding Federal amount.
D)The amount by which the Federal depreciation deduction exceeds the corresponding state amount.
Q5) A use tax applies when a State A resident purchases:
A)A new automobile from a State A dealership.
B)A used automobile from the web site of a State A dealership.
C)A new automobile from a State B dealership, then uses the car back at home.
D)A new automobile that is purchased from an online seller.
Q6) Purchasing ads that show up on search-result screens for internet browsers.
Q7) State income tax expense.
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Chapter 25: Taxation of International Transactions
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Q1) Income tax treaties provide for either higher or lower withholding tax rates on interest income than the rate provided under U.S.statutory law.
A)True
B)False
Q2) The IRS can use § 482 reallocations to assure that transactions between related parties are properly reflected in a tax return.
A)True B)False
Q3) A deemed paid foreign tax credit is included in gross income.
Q4) Foreign tax credit allowed when a foreign corporation makes a distribution to its parent corporation.
Q5) PlantCo is a company based in Adagio.PlantCo uses a formula to manufacture pharmaceuticals.The formula was developed and is owned by DrugCo,a U.S.entity.Royalties paid by PlantCo to DrugCo for the use of the formula are U.S.-source income.
A)True
B)False
Q6) A CFC's profits from sales of goods and services.
Q7) Treasury powers over transfer pricing.
Page 27
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Chapter 26: Tax Practice and Ethics
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Sample Questions
Q1) Under Circular 230,tax preparer Winston cannot disclose to a mortgage banker the income level of her client Pickett,or other information acquired by preparing the return,without Pickett's permission.
A)True
B)False
Q2) Ling has hired CPA Gracie to complete this year's Form 1040.Ling uses online accounting software to keep the books for her interior design sole proprietorship.Ling tells Gracie that a $5,000 amount for business supplies is "close enough" to report for this year's deduction.Gracie can use this estimate in completing the Form 1040.
A)True
B)False
Q3) Preparer penalty for taking an unreasonable tax return position.
Q4) Substantial understatement of a tax.
Q5) The accuracy-related penalties typically relate to ____________________on the part of the taxpayer,or other understatements of tax.
Q6) Some taxpayers must make quarterly estimated payments of their income tax.Describe the structure of these requirements.In your answer,include both corporate and non-corporate taxpayers.
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Chapter 27: The Federal Gift and Estate Taxes
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Q1) Which,if any,of the following is not a characteristic of the Federal gift tax?
A)A charitable deduction is available.
B)The alternate valuation date of § 2032 can be elected.
C)A disclaimer procedure may avoid the tax.
D)A marital deduction is available.
E)None of the above.
Q2) 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 five 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?
Q3) Election to split gifts
Q4) The Federal transfer tax system includes three separate taxes.
A)True
B)False
Q5) A father wants to give a parcel of land to his two children.If he wants the survivor to have sole ownership,he should list ownership of the property as joint tenants.
A)True
B)False
Q6) Tenancy in common
Page 29
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Chapter 28: Income Taxation of Trusts and Estates
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Q1) Which of the following is the annual maximum amount to be included as gross income by all of the income beneficiaries of the trust or estate?
A)Entity taxable income.
B)Entity adjusted gross income.
C)Distributable net income.
D)Fiduciary accounting income.
Q2) For a calendar-year entity,the Form 1041 has an unextended due date of April 15.
Q3) The Jiang Trust operates a manufacturing business.Yan created the trust several years ago by contributing a successful sole proprietorship.The trust distributed one-half of its DNI this year to Yan.Yan can retain all of the trust's depreciation deductions if:
A)Yan is in a higher income tax bracket than is the trust.
B)Jiang is in a higher income tax bracket than is Yan.
C)The depreciable assets were contributed by Yan when the trust was created.
D)One-half of the deductions belongs to the trust. No special allocations are allowed by Subchapter J.
Q4) List and discuss the three major functions of distributable net income (DNI) as that amount is used under Federal income tax law.
Q5) Every simple trust is allowed a $____________________ personal exemption.
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