(EIN:64-6499004) The Hallway Trust will generate a unique EIN that should be use

Question

(EIN:64-6499004) The Hallway Trust will generate a unique EIN that should be used to prepare a 2016 Form 1041 for the trust. please make note of this unique EIN in the space provided below. Make the necessary assumptions for any facts not given. After return preparation is complete, return to test and answer associated questions.

The Hallway Living Trust (EIN:64-6499004) is a trust established for the benefit of two beneficiaries:

Geraldine Hallway
7806 East Washington Lane
Church Point, LA 70525
SSN: 747-64-4001

Constance Hallway
9510 Samson Road
Church Point, LA 70525
SSN: 747-64-4002

according to the trust agreement, the income should be distributed annually to the beneficiaries. In addition to the income distributions, the beneficiaries or each and title 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 qualified dividends: $6,000
Gain on Capital assets: $18,000
Fiduciary fees: ($2,500)
Tax preparation fees: ($500)

1. What is the income distribution deduction reported on schedule B, line 15?

a. $9,431
b. $11,500
c. $17,931
d. $18,000

2. What is the gross income for 2016?

a. $11,500
b. $18,000
c. $30,000
d. $32,500

3. Based on the distribution information provided in the case study, what type of trust is the hallway trust for 2016?

a. Complex
b. Simple
c. Grantor
d. Charitable

4. What is the taxable income for 2016?

a. $11,500
b. $17,700
c. $17,900
d. $18,000

Explanation / Answer

4. Taxable Income = Interest Income + Dividends + Capital Gains (or - Capital Losses) - Fees - Tax Exemption

= 6000+2500+6000+18000-2500-500

= $29,500

1. Distributable Net Income = Taxable Income - Capital Gain (or + Capital Loss) + Tax Exemption

= 29500-18000

= $11,500

Income Distribution Deduction under Schedule B, Line 15 = Least of Distributable Net Income or Other Payments

= Least of $11,500 or ($2,500 + $500)

= $3,000

2. Gross Income = Interest Income + Dividends - Fees - Tax Exemption

=6000+2500+6000-2500-500

= $11,500

3. Option a

A Trust that distributes corpus(addiotional 10000 to income) is called the Complex Trust.

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