CTFA Trust Taxation and Accounting

Question 1

Which IRS form is used to file the annual income tax return for a complex trust?

Accepted Answer

Form 1041

Answer

Form 1040

Answer

Form 706

Answer

Form 990

Question 2

What is distributable net income (DNI) used for in trust taxation?

Accepted Answer

To limit the deduction available to the trust and set the maximum amount taxable to beneficiaries

Answer

To calculate the estate tax owed at the grantor's death

Answer

To determine the trustee's compensation deduction

Answer

To measure the trust's compliance with state accounting income rules

Question 3

A simple trust is required to do which of the following each year?

Accepted Answer

Distribute all current income to beneficiaries and make no charitable contributions or principal distributions

Answer

Accumulate income and distribute only principal to beneficiaries

Answer

File Form 990 with the IRS annually

Answer

Distribute both income and principal equally to all named beneficiaries

Question 4

Under the grantor trust rules (IRC Sections 671-679), who is taxed on trust income?

Accepted Answer

The grantor, regardless of who receives distributions

Answer

The trust itself as a separate taxpayer

Answer

Each beneficiary pro rata based on their remainder interest

Answer

The trustee personally if income exceeds $13,000

Question 5

What is the highest federal income tax rate applied to undistributed trust income in 2024?

Accepted Answer

37%

Answer

20%

Answer

28%

Answer

32%

Question 6

Which of the following expenses is deductible on a trust's Form 1041?

Accepted Answer

Trustee fees allocable to income

Answer

Capital improvements to trust real estate

Answer

Personal living expenses of the beneficiary

Answer

Distributions of corpus to remainder beneficiaries