SU 18: Decedent, Estate, and
Trust Income Tax Returns
fully solved & updated
Mr. Green, a cash-basis taxpayer, died June 30 of the current year. A
review of his records reflected that, as of June 30 of the current
year, he had received interest of $800 and wages of $40,000. Also,
on stock that he owned, a $600 dividend was declared on June 20 of
the current year and was payable on July 15 of the current year.
What is the amount of income to be reported on Mr. Green's final
income tax return?
$40,000
$40,600
$40,800
$41,400 - answer $40,800. 40,000+800= 40,800.
After Mary's death on August 1 of the current year, her estate
received the following:
$50,000 life insurance proceeds
$1,000 interest income from a certificate of deposit that matured on
August 5 of the current year
$2,000 annual royalty on a patent
What amount of taxable income must be reported on the current-
year U.S. Income Tax Return for Estates and Trusts (Form 1041)?
$53,000
$3,000
,$2,400
$52,400 - answer $2,400. 1,000+2,000-600 exemption deduction.
Under the terms of the will of Rick Waters, $6,000 a year is to be
paid to his widow and $3,000 a year to his daughter out of the
estate's income during the period of administration. There are no
charitable contributions. For the year, the estate's distributable net
income is only $6,000. How much must the widow and the daughter
include in their gross incomes?
Widow-Daughter
$4,000-$2,000
$2,000-$1,000
$3,000-$3,000
$6,000-$3,000 - answer Widow $4,000-Daughter $2,000.Each
beneficiary receives a proportional amount. For them, the
proportion is 2 to 1. So for every 1,000 that the daughter receives,
the widow gets 2,000.
A trust was required to distribute $10,000 a year to its sole
beneficiary out of the trust's income for the year. In the current
year, the distributable net income of the trust was $8,000 and the
actual amount distributed was $7,000. How much income must the
beneficiary report for the current year?
$10,000
$7,000
$8,000
$0 - answer $8,000.
Mr. A sold a tract of land and reported the sale using the installment
method of accounting. The net sale price was $80,000, and the cost
basis was $40,000. After A's death, the final $10,000 installment
,(plus interest) was collected by his personal representative. What
amount (other than interest) must be reported as profit on a Form
1041, U.S. Income Tax Return for Estates and Trusts, for the year in
which the $10,000 was received?
$2,500
$5,000
$0
$10,000 - answer $5,000. The gross profit margin is
50%(40,000/80,000). So, 10,000x50%= 5,000 income in respect of a
decedent. The remaining $5,000 is merely a return of capital.
Orsen, a U.S. citizen and the sole income beneficiary of a simple
trust, is entitled to receive current distributions of the trust income.
During the current year the trust reported:
Dividend income $8,000
Accounting fees allocable to income $(2,000)
Net short-term capital gain allocable to corpus $3,000
What amount of the trust income is includible in Orsen's gross
income?
$8,000
$6,000
$9,000
$0 - answer $6,000. 8,000-2,000= 6,000
In general, with regard to net operating losses (NOLs), which of the
following statements is true?
, -An estate or trust may elect to carry its net operating loss forward
only.
-A decedent's deduction for NOLs from business may not be taken
on the final return.
-An estate or trust may carry its net operating loss back 2 years.
-An estate or trust may use the net operating loss not able to be
used by the decedent in his final Form 1040 filing. - answer -An
estate or trust may elect to carry its net operating loss forward only.
If you are the beneficiary of an estate that must distribute all its
income currently (and none is tax-exempt), you must report your
share of
-The distributable net income that you have actually received.
-None of the answers are correct.
-The distributable net income whether or not you have actually
received it.
-The distributable net income plus all other amounts actually paid to
you. - answer -The distributable net income whether or not you have
actually received it.
What civil sanctions may result from the establishment of a
fraudulent trust?
-Fraud penalty of up to 50% of the underpayment of tax attributable
to the fraud.
-Fines up to $250,000 for individuals ($500,000 for corporations)
and/or up to 5 years in prison for each offense.
-Fines up to $250,000 for individuals ($500,000 for corporations).
-Fraud penalty of up to 75% of the underpayment of tax attributable
to the fraud. - answer -Fraud penalty of up to 75% of the
underpayment of tax attributable to the fraud.
Trust Income Tax Returns
fully solved & updated
Mr. Green, a cash-basis taxpayer, died June 30 of the current year. A
review of his records reflected that, as of June 30 of the current
year, he had received interest of $800 and wages of $40,000. Also,
on stock that he owned, a $600 dividend was declared on June 20 of
the current year and was payable on July 15 of the current year.
What is the amount of income to be reported on Mr. Green's final
income tax return?
$40,000
$40,600
$40,800
$41,400 - answer $40,800. 40,000+800= 40,800.
After Mary's death on August 1 of the current year, her estate
received the following:
$50,000 life insurance proceeds
$1,000 interest income from a certificate of deposit that matured on
August 5 of the current year
$2,000 annual royalty on a patent
What amount of taxable income must be reported on the current-
year U.S. Income Tax Return for Estates and Trusts (Form 1041)?
$53,000
$3,000
,$2,400
$52,400 - answer $2,400. 1,000+2,000-600 exemption deduction.
Under the terms of the will of Rick Waters, $6,000 a year is to be
paid to his widow and $3,000 a year to his daughter out of the
estate's income during the period of administration. There are no
charitable contributions. For the year, the estate's distributable net
income is only $6,000. How much must the widow and the daughter
include in their gross incomes?
Widow-Daughter
$4,000-$2,000
$2,000-$1,000
$3,000-$3,000
$6,000-$3,000 - answer Widow $4,000-Daughter $2,000.Each
beneficiary receives a proportional amount. For them, the
proportion is 2 to 1. So for every 1,000 that the daughter receives,
the widow gets 2,000.
A trust was required to distribute $10,000 a year to its sole
beneficiary out of the trust's income for the year. In the current
year, the distributable net income of the trust was $8,000 and the
actual amount distributed was $7,000. How much income must the
beneficiary report for the current year?
$10,000
$7,000
$8,000
$0 - answer $8,000.
Mr. A sold a tract of land and reported the sale using the installment
method of accounting. The net sale price was $80,000, and the cost
basis was $40,000. After A's death, the final $10,000 installment
,(plus interest) was collected by his personal representative. What
amount (other than interest) must be reported as profit on a Form
1041, U.S. Income Tax Return for Estates and Trusts, for the year in
which the $10,000 was received?
$2,500
$5,000
$0
$10,000 - answer $5,000. The gross profit margin is
50%(40,000/80,000). So, 10,000x50%= 5,000 income in respect of a
decedent. The remaining $5,000 is merely a return of capital.
Orsen, a U.S. citizen and the sole income beneficiary of a simple
trust, is entitled to receive current distributions of the trust income.
During the current year the trust reported:
Dividend income $8,000
Accounting fees allocable to income $(2,000)
Net short-term capital gain allocable to corpus $3,000
What amount of the trust income is includible in Orsen's gross
income?
$8,000
$6,000
$9,000
$0 - answer $6,000. 8,000-2,000= 6,000
In general, with regard to net operating losses (NOLs), which of the
following statements is true?
, -An estate or trust may elect to carry its net operating loss forward
only.
-A decedent's deduction for NOLs from business may not be taken
on the final return.
-An estate or trust may carry its net operating loss back 2 years.
-An estate or trust may use the net operating loss not able to be
used by the decedent in his final Form 1040 filing. - answer -An
estate or trust may elect to carry its net operating loss forward only.
If you are the beneficiary of an estate that must distribute all its
income currently (and none is tax-exempt), you must report your
share of
-The distributable net income that you have actually received.
-None of the answers are correct.
-The distributable net income whether or not you have actually
received it.
-The distributable net income plus all other amounts actually paid to
you. - answer -The distributable net income whether or not you have
actually received it.
What civil sanctions may result from the establishment of a
fraudulent trust?
-Fraud penalty of up to 50% of the underpayment of tax attributable
to the fraud.
-Fines up to $250,000 for individuals ($500,000 for corporations)
and/or up to 5 years in prison for each offense.
-Fines up to $250,000 for individuals ($500,000 for corporations).
-Fraud penalty of up to 75% of the underpayment of tax attributable
to the fraud. - answer -Fraud penalty of up to 75% of the
underpayment of tax attributable to the fraud.
