1. ThePrasad Trustincurred thefollowing itemsfor 2014.
Taxable interestincome
$50,000
Tax-exemptinterest income,notonprivateactivitybonds
25,000
Tax-exemptinterest income,onprivateactivitybonds
5,000
Compute Prasadstentativeminimum taxfor theyear. Prasaddoesnot holdanycredits availabletoreduce the AMTliability.
2. TheKapoor Trustis yourclient. Completethe chartbelow,indicating Kapoorstrust accountingincome foreach of thealternatives.
Interest income,taxable
$60,000
Interestincome, 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 ______________________
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 Reggies§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. Rajas accounting income was $100,000, of which $40,000 was distributed to firsttier 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. Rajas DNI was $80,000. Identify the treatment of Rajas cost recovery deductions.
5. Counsellisasimpletrustthatcorrectlyusesthecalendaryearfortaxpurposes.Itsincomebeneficiaries(Kathie,Lynn,Mark,andNorelle) areentitledtothetrustsannualaccountingincomeinsharesofonefourtheach.Forthecurrent calendaryear,thetrusthasordinarybusinessincomeof$40,000,along-term capitalgainof$20,000(allocabletocorpus),andatrusteecommissionexpenseof$4,000(allocabletocorpus).UsetheformatofFigure 20.3inthetexttoaddressthefollowingitems.
a. Howmuchincomeis eachbeneficiaryentitled toreceive?
b. Whatisthe trustsDNI?
c. Whatisthetrusts taxableincome?
d. Howmuch istaxed toeach ofthe beneficiaries?
6. Counsellisasimpletrustthatcorrectlyusesthecalendaryearfortaxpurposes.Itsincomebeneficiaries(Kathie,Lynn,Mark,andNorelle) areentitledtothetrustsannualaccountingincomeinsharesofonefourtheach.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 trustsDNI?
c. Whatisthetrusts taxableincome?
d. Howmuch istaxed toeach ofthe beneficiaries?
