REG estate
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28 terms
Terms | Definitions |
|---|---|
 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 OR 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 of 25%. |
| 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. |
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