STEP Taxation of Trusts and Estates

Question 1

Which tax form is typically filed by a trust or estate in the United States?

Accepted Answer

Form 1041

Answer

Form 1040

Answer

Form 706

Answer

Form W-2

Question 2

What is the purpose of a K-1 form in trust and estate taxation?

Accepted Answer

To distribute income details to beneficiaries

Answer

To report estate tax paid

Answer

To summarize executor expenses

Answer

To calculate trust formation fees

Question 3

When does an estate become a separate taxable entity?

Accepted Answer

Upon the death of the decedent

Answer

Upon the creation of a will

Answer

At the appointment of a trustee

Answer

Once the probate process is complete

Question 4

What type of trust is generally subject to income tax on undistributed income?

Accepted Answer

Complex trust

Answer

Grantor trust

Answer

Revocable trust

Answer

Charitable trust

Question 5

Which of the following is subject to the federal estate tax?

Accepted Answer

Property transfers at death over the exemption limit

Answer

Annual gifts under the exclusion limit

Answer

Life insurance proceeds paid to a spouse

Answer

Charitable bequests

Question 6

Why might a grantor trust be disregarded for income tax purposes?

Accepted Answer

Because the grantor pays the taxes on trust income

Answer

Because it has no assets

Answer

Because the trustee is independent

Answer

Because it has no beneficiaries