The Hallway Living Trust (EIN 64-6499004) is a trust established for the bene t
ID: 2568407 • Letter: T
Question
The Hallway Living Trust (EIN 64-6499004) is a trust established for the bene t of two bene ciaries:
Geraldine Hallway
7806 East Washington Lane 9510 Samson Road Your City, YS XXXXX
SSN: 747-64-4001
Constance Hallway
9510 Samson Road Your City, YS XXXXX Your City, YS
SSN: 747-64-4002
According to the trust agreement, the income should be distributed annually to the bene ciaries.
In addition to the income distributions, the bene ciaries are each entitled to a $10,000 distribution. The trust had the following income and (expenses) during the year:
Interest income: $ 6,000
Municipal interest income: $ 2,500
Ordinary and quali ed dividends: $ 6,000
Gain on capital assets: $18,000
Fiduciary fees: ($ 2,500)
Tax preparation fees: ($ 500)
1) What is the gross income for 2016?
A) $11,500
B) $18,000
C) $30,000
D) $32,500
2) What is the taxable income for 2016?
A) $11,500
B) $17,700
C) $17,900
D) $18,000
3) What is the income distribution deduction reported on Schedule B, line 15?
A) $9,431
B) $11,500
C) $18,000
Explanation / Answer
Fiduciary Fees - Fiduciary fees are the deductible fees paid or incurred to the fiduciary for administering the estate or trust during the tax year.
Tax preparation fees - Fees paid to attorneys, accountants and return preparers in exchange for their services performed on behalf of the trust are a deductible expense.
Interest Income
6000
Municipal Interest Income
2500
Ordinary and Qualified dividends
6000
Gain on capital assets
18000
Gross Income for 2016
32500
Notes
Fiduciary fees:- Fiduciary fees are the deductible fees paid or incurred to the fiduciary for administering the estate or trust during the tax year - Hence not included in calculation for total gross income.
Tax preparation fees: Tax preparation fees is an allowable deduction, Hence not included in calculation for total gross income.
2) Net taxable income is $18,000 - deduction of $300 = $17,700
3) Income distribution deduction $9,431
Interest Income
6000
Municipal Interest Income
2500
Ordinary and Qualified dividends
6000
Gain on capital assets
18000
Gross Income for 2016
32500