|Is charity contributions deductible for estates and trusts?|| Yes. an unlimited charitable deduction is allowed if such|
contributions are provided for in the will (if the contribution is made from the tax-exempt income, it is not deductible).
|How to compute the distributable net income of a fiduciary (estates and trusts)?|| Estate (Trust) Gross Income|
< Estate (Trust) Deductions >
Adjusted Total Income
+ Tax Exempt Income
<Capital Gains contributable to corpus >
Distributable Net Income (DNI)
|How to compute the income distribution deduction?|| the lesser of |
Actual distribution to beneficiary
DNI (less tax-exempt income)
|Is gain or loss recognized on the transfer of property to beneficiaries from fiduciary?||No|
|Is gain or loss recognized on the transfer of property in lieu of cash to beneficiaries from fiduciary?||Yes|
|What do allowable deductions include to calculate distributive net income of fiduciaries?|| 1) personal exemption ($600 for estate, $300 for simple trust, $100 for a complex rust)|
2) charitable contribution
3) capital losses offset capital gains and a net capital loss of up to $3,000 can be deducted with the remainder carried forward
|Is medical and funeral expenses of a decedent allowed as deductions on estate's income tax return?||No|
|What is the tax year end for trusts?||calender year|
|What is the tax year end for estates?||anytime|
|is the expenses incurred by trusts in preparation of property for sale or rental charged to principal or the trusts?||to principal|
|is the expenses incurred by trusts for extraordinary repairs charged to principal or the trusts?||to principal|
|What is a simple trust?||a. A simple trust only makes distributions out of current income; it cannot make distributions from the trust corpus.|
b. A simple trust is required to distribute all of its income currently.
c. A simple trust cannot take a deduction for a charitable contribution.
d. A simple trust is entitled to a $300 exemption in arriving at its taxable income.
|What is the time line related to the estate tax?|| • Individual dies|
• 6 months (maximum) to value the property
• 9 months (extension available) to file tax form
|What is the taxable gift tax threshold?||$13,000 of present interest for single / $26,000 for married and gift splitting is elected (annual exclusion)|
|What kind of gift payments are gift tax exempt?|| 1) payments made directly to an educational institution|
2) payments made directly to a health care provider for medical care
3) charitable gifts
4) marital deduction
|If the value of the interests of the gift is not ascertainable, is it future interest gift or present interest gift?||Future|
|If the bonds bear interests which are only payable until maturity, is the bonds considered as present interest gift or future interest gift?||present interest gift|
|Is a gift which may revert to the donor at some future time a complete gift?||Yes, it is a future interest gift.|
|Is a revocable gift a complete gift?||No.|
|Who pays the gift tax?||the doner|
|What is the penalty on Failure to File a tax return by the due date (with extensions)?|| 5% per month (or fraction of a month) on the amount of tax computed on the return as "due" up to a maximum penalty|
|What is the penalty on Failure to Pay tax due?|| 0.5% per month (or fraction of a month) up to 25% maximum. If|
both the Failure to File and the Failure to Pay penalties are applied, they are not stacked, cannot exceed 25%.
|What is Accuracy Related Penalty?|| 20% of the understatement of taxes when it is due to a|
substantial understatement of income, negligence, or disregard of the rules or regulations.
|What is Fraud Penalty?||Fraud Penalty is 75% of the portion of any underpayment of tax due to willful evasion.|
|What is Earned Income Credit Penalties?|| Earned Income Credit Penalties cause a taxpayer to lose his/her ability to claim the EITC for two years (negligence) and three years (fraud).|
$100 fine for failing to exercise "due diligence"
|How long should a tax return preparer keep returning files?||3 years|
|How many years should audit firm keep files for PCAOB?||7 years|
|What are personal financial planning (PFP) engagements?||Personal financial planning (PFP) engagements only involve developing strategies and recommendations to assist a client in defining and achieving personal financial goals.|