CES Taxation of Estates & Trusts 2

Question 1

Which IRS form must an estate file to report income earned after the decedent's death?

Accepted Answer

Form 1041

Answer

Form 1041 (U.S. Income Tax Return for Estates and Trusts) reports income earned by an estate or trust after the decedent's death.

Question 2

What is the maximum estate tax rate under current federal law?

Accepted Answer

40%

Answer

The federal estate tax rate is a flat 40% on the taxable estate value exceeding the applicable exclusion amount.

Question 3

A trust distributes $20,000 of DNI to its sole beneficiary. How much income must the beneficiary report?

Accepted Answer

$20,000

Answer

Under the conduit principle, distributions carry out DNI to beneficiaries dollar-for-dollar, so the beneficiary reports the full $20,000.

Question 4

Which trust is treated as a 'grantor trust' for income tax purposes when the grantor retains the power to revoke?

Accepted Answer

Revocable living trust

Answer

A revocable living trust is a grantor trust because the grantor retains control, so all trust income is reported on the grantor's personal return.

Question 5

For estate tax purposes, what does the 'gross estate' include?

Accepted Answer

All assets in which the decedent had an includible interest at death

Answer

The gross estate under IRC §2031 includes probate and non-probate assets in which the decedent held an includible interest, such as life insurance and retirement accounts.

(CES) Certified Estate and Trust Specialist Practice Test

(CES) Certified Estate and Trust Specialist Practice Test

CES Taxation of Estates & Trusts 2