Wendy is the settlor of a discretionary trust into which she settled $300,000. Income and capital beneficiaries of the trust include Wendy and her two adult children. Wendy is also the sole trustee. Given this arrangement, who-is responsible for the tax on the income earned by the trust? The trustee can elect to have either the trust assume responsibility for the tax on the income or to allocate responsibility for the tax equally to the three beneficiaries. Wendy. The trust. Wendy and her two children, in equal proportions.
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- Your client has taken the following actions: Established an inter vivos trust in which she reserved the power to revoke the trust if she is not satisfied with its operation Funded the trust with a diversified portfolio Named herself trustee and specified that, upon her death, her husband is to become the trustee Named herself and her husband as the income beneficiaries and her children as remainder beneficiaries after the surviving spouse's death Which one of the following is an income tax implication of this trust arrangement? A) Income earned by the trust is taxed to the children as irrevocable remainder beneficiaries. B) The trust must pay income tax on earned income that is not distributed. C) Your client, the grantor, must pay income tax on all income earned by the trust. D) The trust receives a deduction for the distributable net income paid to the lifetime income beneficiaries.Trust B says the trustee may distribute income in her sole discretion. During the tax year Trust B generates $5,000 of interest income and $4,000 of long term capital gains. Assuming the trustee distributes all eligible items of income, what amount of income will C, the beneficiary, recognize on their tax return? O $5,500 O $9,000 $4,000 $0Henry 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
- The allwardt trust is a simple trust that correctly uses the calander year for tax purposes. It's income beneficiaries (Lucy and Ethel) are entitled to the trusts annual accounting income it shares of one-half each. For the current tax year, allwardt reports the following. Ordinary income $585,000. Long-term capital gains, allocated to corpus $175,500. Legal and accounting fees, allocated to corpus $29,250. What is the trusts DNI? What is the trusts taxable income? How much gross income is reported by each of the beneficiaries?Stephen transferred $18,375 to an irrevocable trust for Graham. The trustee has the discretion to distribute income or corpus for Graham's benefit but is required to distribute all assets to Graham (or his estate) not later than Graham's 21st birthday. What is the amount, if any, of the taxable gift?The trustee of the Spratt Trust has the discretion to distribute the income or corpus of the trust in any proportion between the two beneficiaries of the trust, Edwin and Dolly. Under the trust instrument, Edwin must receive $20,000 from the trust every year. In the current year, the trust's accounting income is $100,000, and its DNI is $90,000. In addition to the required $20,000, the trustee pays Edwin $30,000 and Dolly $50,000. What amount income is recognized by the beneficiaries as the result of the distributions? Round any division to three decimal place and use in subsequent computations. If an amount is zero, enter "0". a. Edwin: First-tier Distribution of $fill in the blank 1 and Second-tier Distribution of $fill in the blank 2.b. Dolly: First-tier Distribution of $fill in the blank 3 and Second-tier Distribution of $fill in the blank 4
- The Kilp Sisters Trust is required to distribute $60,000 annually equally to its two income beneficiaries, Clare and Renee. If trust income is not sufficient to pay these amounts, the trustee can invade corpus to the extent necessary. During the current year, the trust generates only taxable interest income and records DNI of $160,000; the trustee distributes $30,000 to Clare and $150,000 to Renee. a. Are these distributions first-tier or second-tier distributions? The distributions which are composed of trust accounting income that is required to be distributed currently come are that amount would be $ paid one-half each to Renee and Clare. In addition, Renee receives payments in excess of DNI. In this case, in b. How much of the $150,000 distributed to Renee is included in her gross income? C. How much of the $30,000 distributed to Clare is included in her gross income?The Kilp Sisters Trust is required to distribute $60,000 annually equally to its two income beneficiaries, Clare and Renee. If trust income is not sufficient to pay these amounts, the trustee can invade corpus to the extent necessary. During the current year, the trust generates only taxable interest income and records DNI of $160,000; the trustee distributes $30,000 to Clare and $150,000 to Renee. A. Are these distributions first-tier or second-tier distributions? B. How much of the $150,000 distributed to Renee is included in her gross income? C. How much of the $30,000 distributed to Clare is included in her gross income?Each of the items listed below was incurred by José, the cash basis, calendar year decedent. Under the terms of the will, Dora took immediate ownership in all of José's assets, except the dividend-paying stock. The estate received José's final paycheck. Applying the rules for income and deductions in respect of a decedent, indicate on which return each item should be reported: Dora's income tax return (Form 1040), the estate's first income tax return (Form 1041), or the estate's estate tax return (Form 706). More than one alternative or no alternative may apply in some cases. Select the correct answer from each dropdown. Reported on: Form 1040 Income Tax Reported on: José's Estate: First Form 1041 Income Tax Reported on: José's Estate: Form 706 Estate Tax Reported on: Not Reported on Any Return Item Incurred Form(s) Reported on a. Wages (last paycheck received after date of death) ? b. State income tax withheld on last paycheck ? c. Capital gain portion of…