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?
Is gain or loss recognized on the transfer of property in lieu of cash to beneficiaries from fiduciary?
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?
What is the tax year end for trusts?
What is the tax year end for estates?
is the expenses incurred by trusts in preparation of property for sale or rental charged to principal or the trusts?
is the expenses incurred by trusts for extraordinary repairs charged to principal or the trusts?
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?
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?
Who pays the gift tax?
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?
How many years should audit firm keep files for PCAOB?
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.