Trust and Estate Administration Test
Bank
Course Introduction
Trust and Estate Administration explores the legal and practical processes involved in managing and distributing a deceased person's assets according to their will, trust, or applicable laws. This course covers the roles and responsibilities of executors, trustees, and administrators, including the collection and valuation of assets, settlement of debts and taxes, and distribution to beneficiaries. Students will also examine the intricacies of probate proceedings, fiduciary duties, accounting requirements, and techniques for resolving disputes. Through case studies and real-world scenarios, the course prepares students for professional practice in estate and trust administration within the context of current legal frameworks.
Recommended Textbook
South Western Federal Taxation 2013 Corporations Partnerships Estates and Trusts 36th Edition
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20 Chapters
2489 Verified Questions
2489 Flashcards
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Chapter 1: Understanding and Working With the Federal Tax Law
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Sample Questions
Q1) Neither the 1939 nor the 1954 Code substantially changed all the tax law existing on the date of its enactment.
A)True
B)False
Answer: True
Q2) Some Regulations are arranged in different sequence than the Code.
A)True
B)False
Answer: False
Q3) "Legislative regulations" are stronger than "interpretative" regulations.
A)True
B)False
Answer: True
Q4) Allowing a taxpayer to claim either a credit or a deduction for foreign taxes paid can be explained by equity considerations.
A)True
B)False
Answer: True
Page 3
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Chapter 2: Corporations: Introduction and Operating Rules
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Sample Questions
Q1) Copper Corporation owns stock in Bronze Corporation and has net operating income of $900,000 for the year.Bronze Corporation pays Copper a dividend of $150,000.What amount of dividends received deduction may Copper claim if it owns 85% of Bronze stock (assuming Copper's dividends received deduction is not limited by its taxable income)?
A)$97,500.
B)$105,000.
C)$120,000.
D)$150,000.
E)None of the above.
Answer: D
Q2) Erin Corporation,a personal service corporation,had $230,000 of active income,$40,000 of portfolio income,and a $250,000 passive loss during the year.How much is Erin's taxable income?
A)$20,000.
B)$40,000.
C)$270,000.
D)$520,000.
E)None of the above.
Answer: C
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Page 4
Chapter 3: Corporations: Special Situations
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Sample Questions
Q1) Map,Inc. ,has taxable income of $13 million in 2012.What is the maximum DPAD tax savings for this C corporation?
A)None.
B)$204,000.
C)$210,000.
D)$409,500.
E)$441,000.
Answer: D
Q2) Explain the expanded affiliated group (EAG)rules.
Answer: Special rules apply to corporations that are members of an expanded affiliated group (EAG).An EAG is an affiliated group as defined for purposes of the consolidated return rules,except that the stock ownership requirement is reduced to more than 50% (from 80%)and insurance companies and possession credit corporations are not excluded from the group.
In the case of corporations that are members of an EAG,the DPAD is determined by treating the group as a single taxpayer.In effect,therefore,each member of the group is treated as being engaged in the same activities as every other member.The deduction is then allocated among the members in proportion to each member's respective amount of QPAI.
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Chapter 4: Corporations: Organization and Capital Structure
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Sample Questions
Q1) Three individuals form Skylark Corporation with the following contributions: Cliff,cash of $50,000 for 50 shares;Brad,land worth $20,000 (basis of $11,000)for 20 shares;and Ron,cattle worth $9,000 (basis of $6,000)for 9 shares and services worth $21,000 for 21 shares.
A)These transfers are fully taxable and not subject to § 351.
B)Ron's basis in his stock is $27,000.
C)Ron's basis in his stock is $6,000.
D)Brad's basis in his stock is $20,000.
E)None of the above.
Q2) The use of § 351 is not limited to the initial formation of a corporation,and it can apply to later transfers as well.
A)True
B)False
Q3) Five years ago,Joe,a single taxpayer,acquired stock in a corporation that qualified as a small business corporation under § 1244,at a cost of $55,000.Joe wants to give his son,Jake,$15,000 to help finance Jake's college education.The stock is currently worth $15,000.Joe is considering selling the stock in the current year for $15,000 and giving the cash to Jake.As an alternative,Joe could give the stock to Jake and let Jake sell it for $15,000.Which alternative should Joe choose?
Page 6
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Chapter 5: Corporations: Earnings Profits and Dividend
Distributions
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Sample Questions
Q1) On January 1,Gull Corporation (a calendar year taxpayer)has accumulated E & P of $200,000.During the year,Gull incurs a net loss of $280,000 from operations that accrues ratably.On June 30,Gull distributes $120,000 to Sharon,its sole shareholder,who has a basis in her stock of $75,000.How much of the $120,000 is a dividend to Sharon?
A)$0.
B)$60,000.
C)$75,000.
D)$120,000.
E)None of the above.
Q2) On January 1,Gold Corporation (a calendar year taxpayer)has E & P of $30,000 and generates no additional E & P during the year.On March 31,the corporation distributes $40,000 to its sole shareholder,Wyatt (basis in stock of $8,000).Determine the effect of the distribution on Wyatt's taxable income and stock basis.
Q3) Distributions by a corporation to its shareholders are presumed to be a dividend unless the parties can prove otherwise.
A)True
B)False
Q4) How does the payment of a property dividend affect E & P?
Page 7
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Chapter 6: Corporations: Redemptions and Liquidations
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Sample Questions
Q1) Abel owns all the stock of both Beige Corporation and Brown Corporation.Both corporations have significant amounts of E & P.Abel sells some of his stock in Beige to Brown Corporation.Abel will have dividend income as a result of the sale of Beige stock.
A)True
B)False
Q2) 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
Q3) Swan Corporation incurred $10,000 of accounting fees and $15,000 of legal fees in connection with the redemption of stock from its shareholders.None of the expenditures are deductible by Swan.
A)True
B)False
Q4) What are the tax consequences of a § 332 liquidation to the parent corporation,subsidiary corporation,and minority shareholder?
Q5) When is a redemption to pay death taxes under § 303 most advantageous?
Q6) Explain the stock attribution rules that apply in the case of stock redemptions.
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Chapter 7: Corporations: Reorganizations
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Sample Questions
Q1) An exchange of common stock for preferred stock or bonds for preferred stock can qualify as a "Type E" reorganization.
A)True
B)False
Q2) The sound business purpose doctrine and § 269 have the same purpose of disallowing restructurings that are primarily for tax avoidance motives.
A)True
B)False
Q3) When tax attributes are carried over from a loss target corporation to the acquiring corporation,the NOLs are utilized ____________________ (before/after)capital losses.
Q4) The ____________________ doctrine treats several transactions as if they were one transaction when they are all integrated.The ____________________ doctrine ensures that the restructuring has a purpose beyond tax avoidance or evasion.
Q5) The two "Type A" reorganizations are mergers and acquisitions. A)True
B)False
Q6) Compare an acquisitive "Type D" reorganization with the "Type C" reorganization.
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Chapter 8: Consolidated Tax Returns
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Sample Questions
Q1) All affiliates joining in a newly formed consolidated return must consent to the election on Form 1122,as attached to the tax return for the group.
A)True
B)False
Q2) Consolidated return members determine which affiliates will pay how much of the annual Federal income tax liability by making a(n)____________________ election.
Q3) When excessive negative adjustments are made to the stock basis of the subsidiary,a(n)____________________ account is created,rather than giving the parent a negative tax basis in the stock.
Q4) The calendar year Sterling Group files its Federal corporate income tax return on a consolidated basis.The group's Form 1120 is due on March 15,or September 15 if an extended due date is approved by the IRS.
A)True
B)False
Q5) Consolidated estimated tax payments must begin for the ____________________ (first,second,etc. )tax year after the group's election. or
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Page 10
Chapter 9: Taxation of International Transactions
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149 Flashcards
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Sample Questions
Q1) Section 482 is used by the Treasury to:
A)Force taxpayers to use arms-length transfer pricing on transactions between related parties.
B)Reallocate income,deductions,etc. ,to a related taxpayer to minimize tax liability.
C)Increase information that is reported about U.S.corporations with non-U.S.owners.
D)All of the above.
E)None of the above.
Q2) Lang,an NRA who was not a resident of a treaty country,receives taxable dividends of $50,000 from U.S.corporations.Lang does not conduct a U.S.trade or business.Lang's dividends are taxed by the United States through withholding by the payor of: A)0%.
B)15%.
C)30%.
D)35%.
Q3) The United States has in force income tax treaties with about 70 countries.
A)True B)False
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Chapter 10: Partnerships: Formation, operation, and Basis
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Sample Questions
Q1) A limited liability company offers all "members" protection from claims by the LLC's creditors.
A)True
B)False
Q2) TEC Partners was formed during the current tax year.It incurred $10,000 of organizational expenses,$80,000 of startup expenses,and $5,000 of transfer taxes to retitle property contributed by a partner.The property had been held as MACRS property for ten years by the contributing partner,and had an adjusted basis to the partner of $300,000 and fair market value of $400,000.Which of the following statements is correct regarding these items?
A)TEC treats the contributed property as a new MACRS asset placed in service on the date the property title is transferred.
B)TEC must amortize the $10,000 of organizational expenses over 180 months.
C)TEC's startup expenses are amortized over 60 months.
D)TEC must capitalize the transfer tax and treat if as a new asset placed in service on the date the property is contributed.
E)None of the above statements are true.
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Page 12
Chapter 11: Partnerships: Distributions, transfer of Interests, and Terminations
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Sample Questions
Q1) Tom and Terry are equal owners in the Tatum LLC,a cash basis service entity.Tatum has unrealized receivables of $400,000 (basis of $0),and no other hot assets.Goodwill is provided for in the LLC's operating agreement.If Tatum distributes cash of $500,000 to Tom in liquidation of his LLC interest,which of the following statements is incorrect?
A)This is a disproportionate distribution with respect to hot assets.
B)Any portion of the payment that relates to LLC goodwill can be deducted by the LLC as a § 736(a)payment.
C)The payment for Tom's share of the LLC's investment real estate is a § 736(b)payment.
D)Any § 736(a)payment will result in ordinary income to Tom.
E)Any § 736(b)payment will be treated as a payment in exchange for Tom's LLC interest.
Q2) In a liquidating distribution,a partnership must distribute all of its property to all of its partners.
A)True
B)False
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Chapter 12: S: Corporations
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Sample Questions
Q1) Samantha owned 1,000 shares in Evita,Inc. ,an S corporation,that uses the calendar year.On October 11,2012,Samantha sells all of her Evita stock.Her basis at the beginning of 2012 was $60,000.Her share of the corporate income for 2012 was $22,000,and she receives a distribution of $35,000 between January 1 and October 11,2012.Her stock basis at the time of the sale is:
A)$117,000.
B)$82,000.
C)$60,000.
D)$47,000.
Q2) On December 31,2011,Erica Sumners owns one share of an S corporation's 10 outstanding shares of stock.The basis of Erica's share is $300.During 2012,the S corporation has no income or deductions,but incurs a loss of $3,650.Determine the amount of the loss allocated to Erica,and calculate her stock basis at the end of 2012.
Q3) Post-termination distributions that are charged against OAA are received tax-free. A)True
B)False
Q4) The corporate ____________________ ____________________ tax is avoided in an S corporation.
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Chapter 13: Comparative Forms of Doing Business
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Sample Questions
Q1) Normally a C corporation shareholder would prefer to receive a return of capital distribution (e.g. ,stock redemption)rather than a dividend distribution.Provide an example of where the opposite is true.
Q2) Factors that should be considered in making the S corporation election for the current tax year include the following:
A)Are greater than 50% of the shareholders willing to consent to the election?
B)Can the requirements for qualification be satisfied by the 15th day of the third month of the tax year and also for the period of the tax year that precedes this date?
C)Will the corporation have total capital not in excess of $1 million?
D)Only b.and c.
E)a. ,b. ,and c.
Q3) If an individual contributes an appreciated personal use asset to a C corporation in a transaction which qualifies for nonrecognition treatment under § 351,the corporation's basis in the asset is the same as was the shareholder's adjusted basis.
A)True
B)False
Q4) Why are S corporations not subject to the accumulated earnings tax?
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Page 15
Chapter 14: Taxes on the Financial Statements
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Sample Questions
Q1) Jogg,Inc. ,earns book net income before tax of $600,000.Jogg puts into service a depreciable asset this year,and first year tax depreciation exceeds book depreciation by $120,000.Jogg has recorded no other temporary or permanent book-tax differences.Assuming that the U.S.tax rate is 35%,and that this is Jogg's first year of operations,what is Jogg's balance in its deferred tax asset and deferred tax liability accounts at year end?
A)$42,000 and $0.
B)$0 and $42,000.
C)$42,000 and $42,000.
D)$0 and $0.
Q2) A deferred tax liability represents a potential future tax benefit associated with income reported in the current year GAAP financial statements.
A)True
B)False
Q3) Giant uses the "equity method" to account for the operations of its 40% owned subsidiary Little.A portion of Little's profits for the year are included in Giant's GAAP book income.
A)True
B)False
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Chapter 15: Exempt Entities
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Sample Questions
Q1) Under what circumstances are bingo games not treated as an unrelated trade or business?
Q2) Theater,Inc. ,an exempt organization,owns a printing company,Printers,Inc. ,which remits 85% of its profits to Theater,Inc.Since Printers remits at least 85% of its profits to Theater,neither Theater,Inc. ,nor Printers,Inc. ,must pay income tax on this $85,000 ($100,000 ´ 85%).
A)True
B)False
Q3) The tax consequences to a donor of making a charitable contribution to an exempt organization classified as a private foundation may be less favorable than the tax consequences to a donor of making a charitable contribution to an exempt organization that is not classified as a private foundation.
A)True
B)False
Q4) If an organization qualifies for exempt status for Federal income tax purposes,it is exempt from all Federal income taxes.
A)True
B)False
Q5) What income and activities are not subject to the feeder organization rules?
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Chapter 16: Multistate Corporate Taxation
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Q1) In most states,Federal S corporations must make a separate state-level election of the flow-through status.
A)True
B)False
Q2) Almost all of the states allow ____________________ treatment to an LLC for income tax purposes. or or
Q3) ____________________ describe(s)the degree of business activity that must be present before a taxing jurisdiction has the right to impose a tax on an entity's income.
Q4) A taxpayer wishing to reduce the negative tax effects of the application of the unitary theory might:
A)Affiliate with a service division that shows an operating loss,like one in research and development.
B)Acquire a unitary affiliate in a country with a high wage structure.
C)Add a profitable entity to the unitary group.
D)a.and b.
Q5) An ad valorem property tax is based on the asset's current
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Chapter 17: Tax Practice and Ethics
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Sample Questions
Q1) Gadsden,who is subject to a 35% marginal gift tax rate,made a gift of a sculpture to Marvin,valuing the property at $150,000.The IRS later valued the gift at $400,000.The applicable undervaluation penalty is:
A)$0.
B)$17,500.
C)$25,000 (maximum penalty).
D)$35,000.
Q2) Juanita,who is subject to a 35% marginal gift tax rate,made a gift of a sculpture to Bianca,valuing the property at $150,000.The IRS later valued the gift at $300,000.The applicable undervaluation penalty is:
A)$21,000.
B)$10,500.
C)$10,000 (maximum penalty).
D)$0.
Q3) The IRS processes about ____________________ million individual tax returns every year,about ____________________ million of which are filed electronically.
Q4) To file for a tax refund,an individual generally uses Form
Q5) The IRS is a subsidiary agency of the Department of the
Page 19
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Chapter 18: The Federal Gift and Estate Taxes
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Q1) 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,or a QTIP election must be made.
A)True
B)False
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) Most states impose both an estate tax and an inheritance tax.
A)True
B)False
Q4) A Federal gift tax return does not have to be filed if no gift tax is payable.
A)True
B)False
Q5) Mitch pays the surgeon and the hospital for his nondependent aunt's gall bladder operation.The transfer is not subject to the gift tax.
A)True
B)False
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Chapter 19: Family Tax Planning
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Q1) If depreciable property is passed by death,any depreciation recapture potential carries over to the heir.
A)True
B)False
Q2) Abigail makes a gift of stock (basis of $600,000;fair market value of $1,200,000)to her son,Spencer.As a result of the transfer,Abigail paid a gift tax of $120,000.What is Spencer's income tax basis in the stock if the gift occurred in 2012?
Q3) Which,if any,are characteristics of the valuation tables issued by the IRS?
A)The IRS must issue new updated tables once a year.
B)To determine the factor for a remainder interest,subtract the life estate factor provided in the table from one.
C)The same table that provides the factor for a life estate can be used to determine the value of an income interest for a term certain.
D)To use the tables,the Federal mid-term interest rate for the month of the transfer must be known.
E)None of the above.
Q4) What are some of the pitfalls in the use of § 2032A (special use valuation method)?
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21
Chapter 20: Income Taxation of Trusts and Estates
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Q1) You are responsible for the Federal income tax filings of the Tyrone Trust.Summarize the relevant due dates and filing requirements for Tyrone.
Q2) A ____________________ tier distribution is one that the trust agreement requires to be made by the trustee to the income beneficiary. or
Q3) Trusts can select any fiscal Federal income tax year.
A)True
B)False
Q4) Beneficiary Terry received $30,000 from the Urgent Trust.Trust accounting income for the year was $50,000.The trust generated $20,000 in cost recovery deductions.How much can Terry deduct with respect to the cost recovery deductions that Urgent generated?
A)$0.
B)$8,000.
C)$12,000.
D)$20,000.
Q5) Your client Ming is a complex trust that operates exclusively in the U.S.Make a list of five or more tax planning opportunities that you might suggest to Ming.
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