Mary’s will provides in part that she devises the sum of $10,000 each to Tom, Da
ID: 2593330 • Letter: M
Question
Mary’s will provides in part that she devises the sum of $10,000 each to Tom, Dan and Harry. During the estate’s first income tax year the estate has $6,000 of DNI and distributes $10,000 each to Tom Dan and Harry.
a. The personal representative can elect to have the $6,000 of DNI occur in tax year 2 of the estate.
b. The personal representative can elect to have the DNI taxed all to the estate, or all to Tom, Dan and Harry, or partly to the estate and partly to Tom, Dan and Harry.
c. Tom, Dan and Harry will not be income taxed on their distributions.
d. Tom, Dan and Harry will each be taxed on $2,000 of DNI as first tier beneficiaries.
Explanation / Answer
Solution: Tom, Dan and Harry will each be taxed on $2,000 of DNI as first tier beneficiaries.
Explanation: Beneficiaries will be required to report the recognized gain