1.
ThePrasad
Trustincurred
thefollowing
itemsfor
2014.
Taxable
interestincome
$50,000
Tax-exemptinterest
income,notonprivateactivitybonds
25,000
Tax-exemptinterest
income,onprivateactivitybonds
5,000
Compute
Prasadâstentativeminimum
taxfor
theyear.
Prasaddoesnot
holdanycredits
availabletoreduce
the AMTliability.
2.
TheKapoor
Trustis
yourclient.
Completethe
chartbelow,indicating
Kapoorâstrust
accountingincome
foreach
of thealternatives.
Interest
income,taxable
$60,000
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Start My OrderInterestincome,
tax-exempt
30,000
Interestincome,
tax-exemptbut
AMTpreference
10,000
Long-termcapital
gain
40,000
Trusteefee
5,000
Trustagreementprovisions Trustaccountingincome
Fees
and capital gains allocable to
corpus ______________________
Capital
gains allocable to corpus, one-
half of fees
allocable to income ______________________
Capital
gains allocable to income, silent
concerning
allocation of fees ______________________
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Fees and exempt income allocable
to corpus,
silent concerning
allocation of capital gain/loss ______________________
3.
Reggieisoneof
theincome
beneficiariesofthe
LaQuandaEstate,which
issubjectto
a35%marginalFederalestatetaxrate,a35%marginalFederalincometaxrate,anda10%marginal
stateincometaxrate.Thisyear,ReggiereceivedallofthesalescommissionsthatwereearnedandpayabletoLuluLaQuanda(cashbasis)atherdeath.Compute
Reggieâs§691(c)deduction
forthecurrentyear,giventhefollowingdata.
Sales
commissionsreceivable $50,000
Deferredgainoninstallmentsale,threepaymentstobereceived,startingnextyear 20,000
.
4.
The Raja Trust operates a welding business. Its current-year
cost recovery deductions properly amount to $75,000. Rajaâs accounting income was $100,000, of which $40,000 was
distributed to firstÂtier beneficiary Chuck, $25,000 was distributed to second-tier beneficiary Ruby, and $35,000 was
accumulated by the trustee. Ruby also received a $25,000 discretionary corpus
distribution. Rajaâs DNI was $80,000. Identify the treatment of Rajaâs cost
recovery deductions.
5.
Counsellisasimpletrustthatcorrectlyusesthecalendaryearfortaxpurposes.Itsincomebeneficiaries(Kathie,Lynn,Mark,andNorelle)
areentitledtothetrustâsannualaccountingincomeinsharesofoneÂfourtheach.Forthecurrent
calendaryear,thetrusthasordinarybusinessincomeof$40,000,along-term
capitalgainof$20,000(allocabletocorpus),andatrusteecommissionexpenseof$4,000(allocabletocorpus).UsetheformatofFigure
20.3inthetexttoaddressthefollowingitems.
a.
Howmuchincomeis
eachbeneficiaryentitled
toreceive?
b.
Whatisthe
trustâsDNI?
c.
Whatisthetrustâs
taxableincome?
d.
Howmuch
istaxed
toeach
ofthe
beneficiaries?
6.
Counsellisasimpletrustthatcorrectlyusesthecalendaryearfortaxpurposes.Itsincomebeneficiaries(Kathie,Lynn,Mark,andNorelle)
areentitledtothetrustâsannualaccountingincomeinsharesofoneÂfourtheach.Forthecurrent
calendaryear,thetrusthasordinarybusinessincomeof$40,000,along-term
capitalgainof$20,000(allocabletoincome),andatrustee
commissionexpenseof$4,000(allocabletocorpus).UsetheformatofFigure
20.3inthetexttoaddressthefollowingitems.
a.
Howmuchincomeis
eachbeneficiaryentitled
toreceive?
b.
Whatisthe
trustâsDNI?
c.
Whatisthetrustâs
taxableincome?
d.
Howmuch
istaxed
toeach
ofthe
beneficiaries?
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