(please correct answer and question information) Grantor has established a trust, naming a bank as trustee. Pursuant to the terms of the trust document,Grantor is to receive all of the income generated by the trust assets during his life. Grantor maywithdraw assets from the trust or place additional assets into it. The assets placed into the trust consistof Grantor's mutual fund portfolio, personal residence, a rental property located in another state, andtwo installment notes held by Grantor. Upon Grantor's death, all of the assets remaining in the trust areto be distributed to Grantor's two children.Which of the following statements is/are correct?1. Upon the transfer of the installment notes to their trust, any deferred gain will be recognized astaxable income.2. After the transfer, the income from the mutual funds will be reported on Grantor's tax return.3. Upon the transfer of the rental property to the trust, all excess prior years' depreciation will berecaptured.4. After the transfer, the $250,000 exclusion from capital gain remains available for the principalresidence.1 and 32 and 44 only1, 2, and 3

Capital Gain -When an investment or capital asset is sold for more money than it was originally…

Grantor has established a trust, naming a bank as trustee. Pursuant to the terms of the trust docu Grantor is to receive all of the income generated by the trust assets during his life. Grantor may withdraw assets from the trust or place additional assets into it. The assets placed into the trust c of Grantor's mutual fund portfolio, personal residence, a rental property located in another state, a two installment notes held by Grantor. Upon Grantor's death, all of the assets remaining in the tru to be distributed to Grantor's two children. Which of the following statements is/are correct? 1. Upon the transfer of the installment notes to their trust, any deferred gain will be recognized as

Grantor has established a trust, naming a bank as trustee. Pursuant to the terms of the trust docu Grantor is to receive all of the income generated by the trust assets during his life. Grantor may withdraw assets from the trust or place additional assets into it. The assets placed into the trust c of Grantor's mutual fund portfolio, personal residence, a rental property located in another state, a two installment notes held by Grantor. Upon Grantor's death, all of the assets remaining in the tru to be distributed to Grantor's two children. Which of the following statements is/are correct? 1. Upon the transfer of the installment notes to their trust, any deferred gain will be recognized as

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter28: Income Taxation Of Trusts And Estates

Section: Chapter Questions

Problem 15CE

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Which of the following is a charitable lead trust? The income of the trust fund goes to an individual until death, at which time the principal is conveyed to a charitable organization. Charitable gifts are placed into the trust until a certain dollar amount is achieved and is then transferred to a specified charitable organization. The income of a trust fund goes to a charitable organization for a specified time with the principal then being conveyed to a different beneficiary. A charity conveys money to a trust that generates income for the charity’s use in its various projects.
Which of the following are correct statements about the nontax characteristics of a charitable lead trust? The income stream must be paid for the lifetime of the beneficiary. The grantor of the trust receives a charitable income tax deduction in the year the trust is funded. The trust must distribute the remainder interest in the corpus to a noncharitable beneficiary. The trust must distribute the remainder interest in the corpus to a charitable beneficiary. A) I and IV B) I and II C) II and III D) II and IV
Which of the following is a charitable lead trust? Choose the correct.a. The income of the trust fund goes to an individual until death, at which time the principal is conveyed to a charitable organization.b. Charitable gifts are placed into the trust until a certain dollar amount is achieved and is then transferred to a specified charitable organization.c. The income of a trust fund goes to a charitable organization for a specified time with the principal then being conveyed to a different beneficiary.d. A charity conveys money to a trust that generates income for the charity’s use in its various projects.
A simple trust has the following receipts and expenditures for the current year. The trust instrument is silent with respect to the capital gains, and state law concerning trust accounting income follows the Uniform Act. Assume the trustee’s fee is charged equally to principal and income. Corporate bond interest $40,000 Tax-exempt interest 9,000 Long-term capital gain 5,000 Trustee’s fee 2,000 Distribution to beneficiary 48,000 What is the trust’s taxable income? What is the trust’s tax liability?
Henry has established a revocable living trust, which he has only partially funded. Which of the following statements regarding this trust is CORRECT? Any assets that have been transferred to the trust before Henry's death will be subject to probate. Any income from the trust assets is taxable to the trust at trust income tax rates. Any assets that are not transferred to the trust before Henry's death will be subject to probate. A)II only B)III only C)I only D)II and III
An alumnus donates securities to Rex Private College and stipulates that the principal be held in perpetuity and revenues be used for faculty travel. Dividends received from the securities should be recognized as revenues in a. endowment funds. b. quasi-endowment funds. c. restricted current funds. d. unrestricted current funds.
What is the difference between a testamentary trust and an inter vivos trust. A testamentary trust conveys money to a charity; an inter vivos trust conveys money to individuals. A testamentary trust is created by a will; an inter vivos trust is created by a living individual. A testamentary trust conveys income to one party and the principal to another; an inter vivos trust conveys all monies to the same party. A testamentary trust ceases after a specified period of time; an inter vivos trust is assumed to be permanent.
Which one of the following statements best describes the most important feature of a support trust? A) Trust assets must revert to the grantor. B) It is created by the terms of a will and therefore does not become effective until death. C) It provides for the trustee to take over management of the grantor's assets only upon the occurrence or nonoccurrence of certain specified events. D) It provides that the trustee shall distribute only so much of the income or principal as the trustee deems necessary for the support of a named beneficiary.
All of the following statements regarding charitable remainder annuity trusts (CRATs) and charitable remainder unitrusts (CRUTs) are CORRECT except A)they may be established as revocable trusts. B)the annual payout to an income beneficiary may not exceed 50% of the value of the trust. C)the remainder interest at inception must be greater than or equal to 10% of the original value of the property transferred to the trust. D)the remainder beneficiary is a charity.
A grantor is disallowed from doing which of the following in a grantor trust? Avoiding taxation until the trust is revoked. Controlling the disposition of trust property. Distributing current income to the grantor or grantor's spouse. Revoking or modifying the trust.
One premortem liquidity planning technique is to reduce the client's potential gross estate. Which of the following actions may reduce the client's gross estate? Placing assets in a grantor-retained annuity trust (GRAT) with a 10-year term that names the client's child as remainderman Placing assets in a revocable living trust that disperses its assets to the client's child at the client's death Placing assets in an irrevocable trust in which the client is neither a beneficiary or trustee Placing assets in an irrevocable trust in which the client as sole trustee has discretion to distribute income A) I, III, and IV B) II, III, and IV C) I and III D) II and IV
What is the difference between a testamentary trust and an inter vivos trust? Choose the correct.a. A testamentary trust conveys money to a charity; an inter vivos trust conveys money to individuals.b. A testamentary trust is created by a will; an inter vivos trust is created by a living individual. c. A testamentary trust conveys income to one party and the principal to another; an inter vivos trust conveys all monies to the same party. d. A testamentary trust ceases after a specified period of time; an inter vivos trust is assumed to be permanent.