Taxation of Partnerships and S Corporations Practice Exam
Course Introduction
This course provides an in-depth analysis of the federal income tax rules applicable to partnerships and S corporations. Students will explore the formation, operation, and dissolution of these entities, with a particular focus on income allocation, tax basis calculations, distributions, and the distinctive pass-through taxation concepts. Special attention is given to issues such as partner and shareholder transactions, the tax consequences of sales or transfers of interests, and the impact of special allocations. Through case studies and problem-solving, students develop a practical understanding of how taxation affects strategic decision-making in partnership and S corporation settings.
Recommended Textbook
South Western Federal Taxation 2012 Comprehensive by William H. Hoffman
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Chapter 1: An Introduction to Taxation and Understanding
the Federal Tax Law
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Q1) A VAT (value added tax):
A) Is regressive in its effect.
B) Has not proved popular outside of the U.S.
C) Is not a tax on consumption.
D) Is used exclusively by third world (less developed) countries.
E) None of the above.
Answer: A
Q2) The ratification of the Sixteenth Amendment to the U.S.Constitution was necessary to validate the Federal income tax on individuals.
A)True
B)False Answer: True
Q3) The Federal estate and gift taxes are examples of progressive taxes.
A)True
B)False
Answer: True
Q4) The states that impose a general sales tax also have a use tax.
A)True
B)False Answer: True
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Chapter 2: Working With the Tax Law
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Q1) House members have considerable latitude to make amendments on the House floor.
A)True
B)False
Answer: False
Q2) When searching on an online tax service,which approach is more frequently used?
A) Code section approach.
B) Keyword approach.
C) Table of contents approach.
D) Index.
E) All are about the same.
Answer: B
Q3) Which publisher offers the Standard Federal Tax Reporter?
A) Research Institute of America.
B) Commerce Clearing House.
C) Prentice-Hall.
D) LexisNexis.
E) None of the above.
Answer: B
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Page 4
Chapter 3: Tax Determination: Personal and Dependency
Exemptions: an Overview of Property Transactions
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Q1) DeWayne is a U.S.citizen and resident.He spends much of each year in the United Kingdom on business.He is married to Petula,a U.K.citizen and resident of London.DeWayne has heard that it is possible that he can file a joint income tax return for U.S.purposes.If this is so,what are the constraints he should consider in making any such decision?
Answer: The election to file a joint return has the effect of treating Petula as a U.S.resident.Unfortunately,this places Petula on the U.S.global approach to taxation.If Petula has considerable income of her own,the election makes this income subject to U.S.taxation which may be disadvantageous.
Q2) In applying the gross income test in the case of dependents that are married,could the application of community property laws have any effect? Explain. Answer: Most often,the application of community property laws will impact on the dependency status of the spouse of a qualifying child.Suppose,for example,Roger maintains a household that includes his 18-year-old daughter,Alice,and her husband,Craig.Assume further that Alice earns $8,000 from a part-time job while Craig has no income.In a common law state,Craig meets the gross income test of income,while Alice remains immune.
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Chapter 4: Gross Income: Concepts and Inclusions
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Q1) If the employer provides all employees with group term life insurance equal to twice the employee's annual salary,an employee with a salary of $50,000 has no gross income from the life insurance protection provided by the employer.
A)True
B)False
Q2) Lois,who is single,received $9,000 of Social Security benefits.She also received $30,000 from dividends,interest,and her employer's pension plan.If Lois sells a capital asset that produces a $1,000 recognized loss,Lois's taxable income will decrease by less than $1,000.
A)True B)False
Q3) Judy is a cash basis attorney.In 2011,she performed services in connection with the formation of a corporation and received stock with a value of $4,000 for her services.By the end of the year,the value of the stock had decreased to $2,000.She continued to hold the stock.Judy must recognize $4,000 of gross income from the stock for 2011.
A)True
B)False
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Page 6
Chapter 5: Gross Income: Exclusions
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Q1) Generally,a U.S.citizen is not required to include in gross income the salary and wages earned while working in a foreign country if the foreign country taxes the income.
A)True
B)False
Q2) Sharon's automobile slid into a ditch.A stranger pulled her out.Sharon offered to pay $25,but the stranger refused.Sharon slipped the $25 in the stranger's truck when he was not looking.
A) The $25 is a nontaxable gift received by the stranger because Sharon was not legally required to pay him.
B) The $25 is a nontaxable gift because the stranger did not ask to receive it.
C) The $25 is taxable compensation for services rendered.
D) The $25 is a nontaxable service award.
E) None of the above.
Q3) Because graduate teaching assistantships are awarded on the basis of academic achievement,the payments are generally scholarships and therefore are excluded from 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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Q1) Sammie pays his son's real estate taxes.Sammie cannot deduct the real estate taxes,but the son can.
A)True
B)False
Q2) Under certain circumstances,a cash method taxpayer must treat prepayments the same as an accrual method taxpayer.
A)True
B)False
Q3) Assuming an activity is deemed to be a hobby,discuss the order and limits in which expenses must be deducted.
Q4) Beige,Inc.,an airline manufacturer,is conducting negotiations for the sale of military aircraft.One negotiation is with a U.S.assistant secretary of defense.She can close the deal on the purchase of 50 attack helicopters if she is paid $750,000 under the table.Another negotiation is with the minister of defense of a third world country.To complete the sale of 20 jet fighters to his government,he demands that he be paid a $1 million grease payment.Beige makes the payments and closes the deals.How much of these payments are deductible by Beige,Inc.?
Q5) What losses are deductible by an individual taxpayer?
Q6) Briefly discuss the disallowance of deductions for capital expenditures.
Page 8
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Chapter 7: Deductions and Losses: Certain Business
Expenses and Losses
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Q1) What are the three methods of handling research and experimental expenditures incurred in a trade or business? Under what circumstances would you choose each?
Q2) If an account receivable written off during the current year is subsequently collected during the current year,the write-off entry is reversed.
A)True
B)False
Q3) The domestic production activities deduction (DPAD)for 2011 cannot exceed 50% of all W-2 wages paid to employees by the taxpayer during the tax year.
A)True
B)False
Q4) For tax years beginning in 2011,the domestic production activities deduction (DPAD)for a sole proprietor is calculated by multiplying 9% times the lesser of (1)qualified production activities income (QPAI)or (2)taxable income or alternative minimum taxable income.
A)True
B)False
Q5) How is qualified production activities income (QPAI)calculated?
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Q6) Why was the domestic production activities deduction (DPAD)enacted by Congress?
Chapter 8: Depreciation, cost Recovery, amortization, and Depletion
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Q1) Howard's business is raising and harvesting peaches.On March 10,2011,Howard purchased 10,000 new peach trees at a cost of $60,000.Howard does not elect to expense assets under § 179.Determine the cost recovery deduction for 2011.
A) $0.
B) $2,500.
C) $10,000.
D) $60,000.
E) None of the above.
Q2) Discuss the effect on the cost recovery method of a taxpayer election if the uniform capitalization rules apply to a farming business.
Q3) On April 5,2011,Orange Corporation purchased,and placed in service,seven-year class assets costing $700,000 and five-year class assets costing $1,400,000.Orange elects to expense the maximum amount under § 179.Orange elected not to deduct additional first-year depreciation.Assume taxable income is not a limitation.Determine Orange Corporation's cost recovery with respect to the assets for 2011.
Q4) Polly purchased a new hotel on July 20,2011,for $6,000,000.On January 20,2018,the building was sold.Determine the cost recovery deduction for the year of the sale.
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Chapter 9: Deductions: Employee and
Self-Employed-Related Expenses
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Q1) Which,if any,of the following expenses are not subject to the 2%-of-AGI floor?
A) Safety shoes purchased by an employed plumber.
B) Reimbursed employee expenses. Taxpayer-employee renders an adequate accounting to the employer.
C) Unreimbursed employee expenses.
D) Tax return preparation fee paid by a non-employed retiree.
E) None of the above.
Q2) In November 2011,Katie incurs unreimbursed moving expenses to accept a new job.Katie cannot deduct any of these expenses when she timely files her 2011 income tax return since she has not yet satisfied the 39-week time test.
A)True
B)False
Q3) Concerning the deduction for moving expenses,what circumstances,if any,will excuse a taxpayer from meeting the time test of 39 or 78 weeks?
Q4) Olivia and Joshua work for different companies and each has an IRA.Olivia can deduct the contributions to her IRA,while Joshua cannot.Explain.
Q5) In terms of income tax treatment,what is the difference between common law and statutory employees?
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Chapter 10: Deductions and Losses: Certain Itemized
Deductions
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Q1) George,a sculptor,has an elevator installed in his house to transport heavy materials to his loft studio because he is concerned that he might strain his back by lifting heavy objects.George may deduct the full cost of the elevator as a medical expense.
A)True
B)False
Q2) Grace's sole source of income is from a restaurant that she owns and operates as a proprietorship.Any state income tax Grace pays on the business net income must be deducted as a business expense rather than as an itemized deduction.
A)True
B)False
Q3) In 2004,Ross,who is single,purchased a personal residence for $170,000 and took out a mortgage of $100,000 on the property.In May of the current year,when the residence had a fair market value of $220,000 and Ross owed $70,000 on the mortgage,he took out a home equity loan for $110,000.He used the funds to purchase a BMW for himself and a Lexus SUV for his wife.For both vehicles,100% of the use is for personal activities.What is the maximum amount on which Ross can deduct home equity interest?
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Chapter 11: Investor Losses
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Q1) Identify the types of income that are classified as investment income.Discuss the flexibility that a taxpayer has with respect to certain types of income that may potentially be considered investment income.
Q2) Paula owns four separate activities.She elects not to group them together as a single activity under the "appropriate economic unit" standard.Paula participates for 130 hours in Activity A,115 hours in Activity B,260 hours in Activity C,and 100 hours in Activity D.She has one employee,who works 125 hours in Activity D.Which of the following statements is correct?
A)Activities A,B,C,and D are all significant participation activities.
B)Paula is a material participant with respect to Activities A,B,C,and D.
C)Paula is not a material participant with respect to Activities A,B,C,and D.
D)Losses from all of the activities can be used to offset Paula's active income.
E)None of the above.
Q3) Jared earned investment income of $22,000 and incurred investment interest expense of $14,000 during 2011.He incurred other investment expenses of $7,000 during the year.Jared may deduct $14,000 of investment interest in 2011.
A)True
B)False
Q4) What special passive loss treatment is available to real estate activities?
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Chapter 12: Tax Credits and Payments
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Q1) The earned income credit is available only if the taxpayer has at least one qualifying child in the household.
A)True
B)False
Q2) A taxpayer may qualify for the credit for child and dependent care expenses if the taxpayer's dependent is under age 17.
A)True
B)False
Q3) In May 2007,Alma incurred qualifying rehabilitation expenditures of $400,000 on a certified historic structure and properly claimed the tax credit for rehabilitation expenditures.In March 2011,she sold the building at a loss.Calculate the rehabilitation expenditures credit recapture that she must report in 2011.
Q4) The purpose of the tax credit for rehabilitation expenditures is to encourage the relocation of businesses from older,economically distressed areas (i.e.,inner city)to newer locations.
A)True
B)False
Q5) Discuss the treatment of unused general business credits.
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Chapter 13: Property Transactions
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Q1) Don,who is single,sells his personal residence on October 5,2011,for $380,000.His adjusted basis was $102,000.He pays realtor's commissions of $18,000.He owned and occupied the residence for 14 years.Having decided that he no longer wants the burdens of home ownership,he invests the sales proceeds in a mutual fund and enters into a 1-year lease on an apartment.The detriments of renting,including a crying child next door,cause Don to rethink his decision.Therefore,he purchases another residence on November 6,2012,for $188,000.Is Don eligible for exclusion of gain treatment under § 121 (exclusion of gain on sale of principal residence)? Calculate Don's recognized gain and his basis for the new residence.
Q2) Sam sells land with an adjusted basis of $35,000 and a fair market value of $50,000 to Cynthia,his wife,for $50,000.Discuss how the tax consequences would differ if Sam and Cynthia had never been married.
Q3) Hilary receives $10,000 for a 13-foot wide utility easement along one of the boundaries to her property.The easement provides that no structure can be built on that portion of the property.Her adjusted basis for the property is $200,000 and the easement covers 15% of the total acreage.Determine the effect of the $10,000 payment on Hilary's gross income and her basis for the property.
Q4) Define an involuntary conversion.
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Page 15
Chapter 14: Property Transactions: Capital Gains and Losses
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Q1) Section 1250 depreciation recapture will apply when accelerated depreciation was used on property used outside the United States and the property is sold at a gain.
A)True
B)False
Q2) A silo held more than one year and used in a business is destroyed in an earthquake.The silo originally cost $356,000 and was fully depreciated using straight-line depreciation.The silo was insured for its $543,000 replacement cost minus a deductible of $1,000.Which of the statements below is correct concerning these facts?
A) The silo was a long-term personal use asset.
B) There is a casualty loss from disposition of the silo.
C) The recognized gain from disposition of the silo is $186,000.
D) The recognized gain from disposition of the silo is subject to special netting rules.
E) c. and d.
Q3) When a patent is sold,a common form of payment received by the transferor is a periodic payment.
A)True
B)False
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Page 16
Chapter 15: Alternative Minimum Tax
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Q1) Van's AGI is $195,000.He contributed $120,000 in cash to the Boy Scouts,a public charity.What is Van's charitable contribution deduction for AMT purposes?
A) $39,000.
B) $58,500.
C) $97,500.
D) $120,000.
E) None of the above.
Q2) What effect do deductible gambling losses for regular income tax purposes have in calculating AMTI?
Q3) Which of the following can produce an AMT preference rather than an AMT adjustment?
A) Circulation expenditures.
B) Research and experimental expenditures.
C) Percentage depletion.
D) Incentive stock options (ISOs).
E) None of the above.
Q4) Can AMT adjustments and preferences be both positive and negative?
Q5) Discuss the tax year in which an AMT adjustment is first required for an ISO.
Q6) Why is there no AMT adjustment for charitable contributions?
Page 17
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Chapter 16: Accounting Periods and Methods
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Q1) The Seagull Partnership has three equal partners.Partner A's tax year ends June 30th,and Partners B and C use a calendar year.If the partnership uses the calendar year to report its income,Partner A is permitted to defer partnership income earned from July through December 2011 until he files his tax return for his year ending June 30,2012.
A)True
B)False
Q2) Franklin Company began business in 2008 and has consistently used the cash method to report income from the sale of inventory in income tax returns filed for 2008 through 2011.As a result of an audit by the IRS,Franklin was required to change to the accrual method of accounting beginning with 2012.The net adjustment due to the change is a positive adjustment to income.
A)True
B)False
Q3) A retailer must actually receive a claim for refund from the customer before a deduction can be taken for the refund.
A)True
B)False
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Chapter 17: Corporations: Introduction and Operating Rules
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Q1) Donald owns a 60% interest in a partnership that earned $230,000 in the current year.He also owns 60% of the stock in a C corporation that earned $230,000 during the year.Donald received $50,000 in distributions from each of the two entities during the year.With respect to this information,Donald must report $188,000 of income on his individual income tax return for the year.
A)True
B)False
Q2) Explain the rules regarding the accounting periods available to corporate taxpayers.
Q3) Hippo,Inc.,a calendar year C corporation,manufactures golf gloves.For 2011,Hippo had taxable income (before DPAD)of $800,000,qualified domestic production activities income of $950,000,and W-2 wages related to qualified production activities income of $130,000.Hippo's domestic production activities deduction for 2011 is:
A) $0.
B) $65,000.
C) $72,000.
D) $85,500.
E) None of the above.
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Page 19
Chapter 18: Corporations: Organization and Capital Structure
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Q1) In a § 351 transaction,if a transferor receives consideration other than stock,the transaction can be taxable.
A)True
B)False
Q2) Carl transfers land to Cardinal Corporation for 90% of the stock in Cardinal Corporation worth $20,000 plus a note payable to Carl in the amount of $40,000 and the assumption by Cardinal Corporation of a mortgage on the land in the amount of $100,000.The land,which has a basis to Carl of $70,000,is worth $160,000.
A) Carl will have a recognized gain on the transfer of $90,000.
B) Carl will have a recognized gain on the transfer of $30,000.
C) Cardinal Corporation will have a basis in the land transferred by Carl of $70,000.
D) Cardinal Corporation will have a basis in the land transferred by Carl of $160,000.
E) None of the above.
Q3) A corporation's holding period for property received under § 351 includes the holding period of the transferor shareholder.
A)True
B)False
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Chapter 19: Corporations: Distributions Not in Complete
Liquidation
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Q1) Tangelo Corporation has an August 31 year-end.Tangelo had $50,000 in accumulated E & P at the beginning of its 2012 fiscal year (September 1,2011)and during the year,it incurred a $75,000 operating loss.It also distributed $65,000 to its sole shareholder,Cass,on November 30,2011.If Cass is a calendar year taxpayer,how should she treat the distribution when she files her 2011 income tax return (assuming the return is filed by April 15,2012)?
A) $65,000 of dividend income.
B) $60,000 of dividend income and $5,000 recovery of capital.
C) $50,000 of dividend income and $15,000 recovery of capital.
D) The distribution has no effect on Cass in the current year.
E) None of the above.
Q2) Certain dividends from foreign corporations can be qualified dividends for purposes of the 15% rate available to individuals.
A)True
B)False
Q3) When computing E & P,an adjustment to taxable income is necessary for any domestic production activities deduction.
A)True
B)False
Page 21
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Chapter 20: Corporations: Distributions in Complete
Liquidation and an Overview of Reorganizations
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Q1) Discuss the role of letter rulings in corporate reorganizations.
Q2) If the target corporation in a reorganization has a deficit in earnings and profits,any gains recognized by the shareholders are treated as stock redemptions and not as dividends.
A)True
B)False
Q3) Which of the following statements is correct with respect to the § 338 election?
A) The subsidiary corporation makes the § 338 election.
B) A qualified stock purchase occurs when a corporation acquires, in a taxable transaction, at least 80% of the stock (voting power and value) of another corporation within a 18-month period.
C) The subsidiary corporation must be liquidated pursuant to the § 338 election.
D) For purposes of the qualified stock purchase requirement, subsidiary corporation stock acquired by any member of an affiliated group that includes the parent corporation is considered acquired by the parent.
E) None of the above.
Q4) Describe the requirements for and tax consequences of a § 338 election.
Q5) 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) A partnership must provide any information to the partners that the partners would need to calculate deductions not permitted at the partnership level,such as for oil and gas depletion or the corporate dividends received deduction.
A)True
B)False
Q2) Molly is a 40% partner in the MAP Partnership.During the current tax year,the partnership reported ordinary income of $210,000 before payment of guaranteed payments and distributions to partners.The partnership made an ordinary cash distribution of $30,000 to Molly,and paid guaranteed payments to partners Molly,Amber,and Pat of $30,000 each ($90,000 total).How much will Molly's adjusted gross income increase as a result of the above items?
A) $88,000.
B) $78,000.
C) $66,000.
D) $36,000.
E) None of the above.
Q3) Meagan is a 40% general partner in the calendar year,cash basis MKK Partnership.The partnership received $100,000 income from services and paid the following other amounts:
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Page 23
Chapter 22: S Corporations
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Q1) Depletion in excess of basis in property causes a(n)____________________ adjustment to an S shareholder's basis. or
Q2) The LIFO recapture tax is a variation of the passive investment income penalty tax.
A)True
B)False
Q3) Compensation for services rendered to an S corporation is subject to FICA taxes.
A)True
B)False
Q4) Pass-through S corporation losses can reduce the basis in the shareholder's loan to the entity,but distributions do not.
A)True
B)False
Q5) Which could constitute a second class of stock under the S corporation rules?
A) Treasury stock.
B) Phantom stock.
C) Unexercised stock options.
D) Warrants.
E) None of the above.
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Chapter 23: Exempt Entities
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Q1) Qualified state tuition programs are exempt from Federal income tax under § 501(c)(3).
A)True
B)False
Q2) Loyal,Inc.,is a §501(c)(3)organization that is not classified as a private foundation.During the current year,it is subject to intermediate sanctions.What other options does the IRS have in dealing with an exempt organization engaging in prohibited transactions?
Q3) A feeder organization is exempt from Federal income taxation because it carries on a trade or business for the benefit of an exempt organization and remits its profits to the exempt entity.
A)True
B)False
Q4) Which of the following is not an excise tax that may be imposed on a private foundation?
A) Tax on jeopardizing investments.
B) Tax on self-dealing.
C) Tax on excessive foundation manager compensation.
D) Tax on excess business holdings.
E) All of these taxes may be imposed on a private foundation.
Page 25
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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 State B office of an agency of the U.S.government.General has not established nexus with B.State A does not apply a throwback rule.In which state(s)will the sale be included in the sales factor numerator?
A)In all of the states,according to the apportionment formulas of each,as the U.S.government is present in all states.
B)$100,000 in A.
C)$100,000 in B.
D)$0 in both A and B.
Q2) Bulky Company sold an asset on the first day of the tax year for $500,000.Bulky's Federal tax basis for the asset was $300,000.Because of differences in cost recovery schedules,the state regular-tax basis in the asset was $375,000.What adjustment,if any,should be made to Bulky's Federal taxable income in determining the correct taxable income for the typical state?
A) $75,000.
B) $25,000.
C) ($75,000).
D) $0.
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Chapter 25: Taxation of International Transactions
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Q1) RedCo,a domestic corporation,incorporates its foreign branch in a § 351 exchange,creating GreenCo,a wholly owned foreign corporation.RedCo transfers $200 in Yen (basis = $150)and $900 in land (basis = $925)to GreenCo.GreenCo uses these assets in carrying on a trade or business outside the United States.What gain or loss,if any,is recognized as a result of this transaction?
A) $0.
B) $50.
C) $25.
D) ($25).
Q2) Which of the following is a principle used in applying income sourcing under U.S.rules?
A) Location of economic activity.
B) Country with lowest tax rate.
C) Country with highest tax rate.
D) Potential size of allowed foreign tax credit.
Q3) Which of the following is not a foreign person?
A) Citizen of Germany with U.S. permanent resident status (i.e., green card).
B) Foreign corporation 100% owned by a domestic corporation.
C) Foreign corporation 51% owned by U.S. shareholders.
D) Citizen of Italy who spends 14 days vacationing in the United States.
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Chapter 26: Tax Practice and Ethics
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Sample Questions
Q1) A(n)___________________ member is required to follow the Statements of Standards for Tax Services in conducting a tax practice.
Q2) Ming (a calendar year taxpayer)donates a painting to a local art museum (a qualified charity).The painting cost Ming $2,000 ten years ago and,according to one of Ming's friends (an amateur artist),is worth $40,000.On his income tax return,Ming deducts $40,000 as a Form 1040 charitable contribution.Upon later audit by the IRS,it is determined that the true value of the painting was $30,000.Assuming that Ming is subject to a 30% marginal Federal income tax rate,his penalty for overvaluation is:
A) $5,000.
B) $2,000.
C) $1,000.
D) $0.
E) $10,000 (minimum penalty).
Q3) The IRS periodically updates its list of "audit initiatives," the areas of tax enforcement that will receive special attention during the current tax year.List five or more of the current IRS audit initiatives.
Q4) The Code's scope of privileged communications for a CPA extends only to ____________________ advice given.
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Chapter 27: The Federal Gift and Estate Taxes
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Q1) In 2000,Katelyn inherited considerable property when her father died.When Katelyn dies in 2011,her estate may be able to use § 2013 (credit for tax on prior transfers)as to some of the estate taxes paid by her father's estate.
A)True
B)False
Q2) In some cases,the Federal gift tax can be imposed on someone other than the donor.
A)True
B)False
Q3) Community property law has been influential in the enactment of several provisions of the Federal estate and gift tax.In this regard,comment on the marital deduction under §§ 2056 and 2523.
Q4) To avoid the terminable interest limitation on the marital deduction,the surviving spouse must be granted a general power of appointment over the trust property,and a QTIP election must be made.
A)True
B)False
Q5) How could the § 2513 election to split gifts help avoid the generation-skipping transfer tax (GSTT)?
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Chapter 28: Income Taxation of Trusts and Estates
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140 Verified Questions
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Sample Questions
Q1) The Whitmer Trust operates a manufacturing business and distributes the profits to its income beneficiaries.Whitmer passes through to the income beneficiaries the data needed to compute their domestic production activities deduction.
A)True
B)False
Q2) The Roz Trust has distributable net income for the year of $100,000 and no income from tax-exempt sources.Under the terms of the trust instrument,the trustee must distribute $30,000 to Roger and $30,000 to Sally.After paying these amounts,the trustee is empowered to make additional distributions at its discretion.Exercising this authority,the trustee distributes an additional $10,000 to Roger and $30,000 to Sally.How much gross income from the trust must Sally recognize?
A) $80,000.
B) $60,000.
C) $50,000.
D) $20,000.
Q3) A ____________________ trust is a revocable entity that is used to avoid probate upon the death of the grantor.
Q4) The IRS encourages ____________________ filing for Forms 1041.
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