Chapter 20

True/False
Indicate whether the statement is true or false.

____ 1. Tax planning motivations usually are secondary to other objectives in deciding whether to create a trust.

____ 2. A trust might be used by the parties to an impending divorce.

____ 3. Like a limited liability company, the fiduciary is a tax-reporting, but not a separate tax-paying entity.

____ 4. An estate’s income beneficiary generally must wait until the entity is terminated by the executor to receive any distribution of income.

____ 5. With respect to a trust, the terms creator, donor, and grantor are synonyms.

____ 6. Corpus, principal, and assets of the trust are synonyms.

____ 7. If provided for in the controlling agreement, a trust might terminate when the income beneficiary graduates with a law degree.

____ 8. The decedent’s estate must terminate within four years of the date of death.

____ 9. Trusts usually are required to use a calendar tax year

____ 10. A complex trust pays tax on the income that it retains and adds to corpus.

____ 11. A complex trust may incur a liability for the AMT.

____ 12. The first step in computing an estate’s taxable income is the determination of its gross income for the year.

____ 13. Generally, capital gains are allocated to fiduciary income, because they relate to investment assets.

____ 14. Gain or loss is recognized by a trust when it distributes a non-cash asset.

____ 15. Income in respect of a decedent can be subject to both income and estate tax at the Federal level.

____ 16. An example of income in respect of a decedent is the taxpayer’s last paycheck, uncollected at death.

____ 17. When a trust operates a trade or business, it can claim a deduction for wages paid to employees.

____ 18. Estates and trusts can claim Federal income tax deductions for