1) Joseph is the sole trustee of a trust fund of $1,000,000. By the terms of the trust, he is under a duty to invest the money ‘as if he were absolutely entitled to the assets of the trust’. Ronald, an investment broker, approaches him, who offers to pay him $100,000 ‘no questions asked’ if he invests the trust fund with him. Joseph agrees, and is paid the $100,000. Ronald invests the $1,000,000 on the stock market, eventually losing $700,000. Joseph is now insolvent with only $300,000 remaining, and Ronald has fled the country. Question: Advise the beneficiaries of the trust.

1) Joseph is the sole trustee of a trust fund of $1,000,000. By the terms of the trust, he is under a duty to invest the money ‘as if he were absolutely entitled to the assets of the trust’. Ronald, an investment broker, approaches him, who offers to pay him $100,000 ‘no questions asked’ if he invests the trust fund with him. Joseph agrees, and is paid the $100,000. Ronald invests the $1,000,000 on the stock market, eventually losing $700,000. Joseph is now insolvent with only $300,000 remaining, and Ronald has fled the country. Question: Advise the beneficiaries of the trust.

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter28: Income Taxation Of Trusts And Estates

Section: Chapter Questions

Problem 26P

See similar textbooks

Similar questions

4) Johnny bench sets up an irrevocable trust. He funds it with 1,000,000 .He makes Joe Morgan the trustee. Joe Morgan is given a power of appointment The power of appointment allows Joe Morgan to appoint the corpus to any of the following: Himself, Ken Griffey Sr, Bill Plummer, or Ray Knight If not appointed to any of the above then to the taker by default: Steve Garvey The power of appointment is limited to disbursements for ascertainable standards of health education or support . Joe Morgan dies. He never appointed the money to anyone What amount is included in his estate? What if he had appointed $50,000 to himself and it was in his bank account ? What if we add happiness ?
please help answers both of these
Bran pays an adviser $1,000 to help manage his investments and provide investment advice. The adviser’s fee is not directly related to any particular investment owned by Bran. He owns $80,000 worth of municipal bonds that pay his $6,000 in interest and $20,000 worth of bonds that pay his taxable interest of $2,000. Determine the deductible investment expenses related to the $1,000 fee for investment advice. Use the relative investment income to allocate indirect expenses. $0 B. $250 C. $750 D. $800 E. $1,000
Donna Stober’s estate has the following assets (all figures approximate fair value): The house, cash, and other assets are left to the decedent’s spouse. The investment land is contributed to a charitable organization. The automobiles are to be given to the decedent’s brother. The investments in stocks and bonds are to be put into a trust fund. The income generated by this trust will go to the decedent’s spouse annually until all of the couple’s children have reached the age of 25. At that time, the trust will be divided evenly among the children. The following amounts are paid prior to distribution and settlement of the estate: funeral expenses of $20,000 and estate administration expenses of $10,000. What value is to be reported as the taxable estate for federal estate tax purposes?
Ma1. Dan Daytona has created a revocable contingent trust to handle his financial affairs when and if he becomes incompetent. He has named his brother as trustee and has given his brother a durable springing power of attorney to use in funding the trust. Which of the following statements regarding this trust arrangement are correct? Dan has given his brother a general power of appointment. Dan’s brother can use the durable power of attorney at any time. Dan will not owe a gift tax when the trust is funded. Dan’s brother can use the durable power of attorney to place any remaining assets in the trust at Dan’s death to avoid probate. III only I and III only II and IV only I, II, and IV only
The Liu Trust is short of cash. It is required to distribute $100,000 to Yang every year, and that payment is due in six weeks. In its asset corpus, Liu holds a number of investments that are valued at $100,000. One of them is a plot of land with a tax basis to the trust of $80,000. Assuming that the trust agreement allows, what are the Federal income tax consequences if Liu distributes this land to Yang? If an amount is zero, enter "0". Without a § 643(e) election:DNI and distribution deduction is $.Gross income to Liu is $.Basis to Yang is $. With a § 643(e) election:DNI and distribution deduction is $.Gross income to Liu is $.Basis to Yang is $.
Nadine established the “Nadine Family Trust” in 1990 with ABC Pty Ltd as the corporate trustee. Nadineand her husband Brad are the directors of the trustee company. The trust holds a variety of investments inproperty and cash. The trust was established to protect the investments as Nadine is always concernedthat she could be sued for negligence.The trust records for this income year disclose the following:Receipts ($)60,000 Rent from investment properties6,000 Interest from a bank account3,000 Unfranked dividendPayments ($)4,000 Accounting expenses for tax return5,000 Repairs to investment properties14,000 Interest on a loan for the investment property1,000 Legal expenses incurred in defending a claim by a tenantBrad works as an engineer and earned $90,000 in this income year. Nadine is a senior lawyer and receiveda salary of $180,000 in this income year. Nadine and Brad are married. They have three children:• a son, John, aged 21 years, a student at university who earned $6,000 for…
Your client was the beneficiary of an annuity contract purchased by her stepmother. When the stepmother died, the insurance company paid the client $400,000 and sent her a Form 1099 indicating that the taxable portion (i.e., the amount in excess of the investment in the contract) was $50,000. However, according to the client, her father fraudulently convinced her that he was the intended beneficiary. She gave her father a check equal to the amount she had received from the insurance company. She did not report any of the annuity proceeds in her income tax return. She later discovered the fraud and filed a lawsuit to collect from her father. The IRS has examined your client’s return and has taken the position that she must include the $50,000 in her gross income. Evaluate the IRS’s position.
Stephen transferred $18,375 to an irrevocable trust for Graham. The trustee has the discretion to distribute income or corpus for Graham's benefit but is required to distribute all assets to Graham (or his estate) not later than Graham's 21st birthday. What is the amount, if any, of the taxable gift?
Richard is the trustee of the Williams family Trust. Last year he directed Steve a broker, to purchase an unauthorized investment for the Trust. Both Richard and Steve realized that the investment was unauthorized, but both thought the trust investment clause was too restrictive. Furthermore, David a solicitor, advised Richard that so long he was taking risk in the best interest of the beneficiaries, he would be protected by the trustee exemption clause in the trust instrument. He also advised Steve that it would be very unlikely for the court not to exonerate him as well even though not being a trustee, he did not have a specific protection of the clause. Richard and Steve proceed with the investment in good faith, Steve taking a $10,000 brokerage fee. The investment which was initially worth US$100,000 is now worth US$ 50,000 after just 3 weeks from the date of the unauthorized change. Advise the beneficiaries.
Last year Robert transferred a life insurance policy worth $470,000 to an irrevocable trust with directions to distribute the corpus of the trust to a grandson, Danny, upon graduation from college, or to Danny's estate upon death. Robert paid $41,000 of gift tax on the transfer of the policy. Early this year, Robert died, and the insurance company paid $4.2 million to the trust. What amount, if any, is included in Robert's gross estate? Note: Enter your answers in dollars, not millions of dollars. Amount to be included in Robert's gross estate
Determine the correct value for each of the following questions: 1. Assume that an individual gives cash to the following parties: $25,000 to a charitable organization, $15,000 to her grandson for his college tuition, $8,000 to her granddaughter to buy a car, and $14,000 to her spouse for a trip to France. What amount of gifts is considered taxable? 2. Assume that an individual has given $25,000 to each of his four grandchildren for each of the past three years and $50,000 to a charitable organization. If he wants to make a single gift to each of his four grandchildren, what would the maximum gift per grandchild be in order to avoid all gift tax? 3. Your client made the following gifts last year: $200,000 to each of her three children, $50,000 to her brother, and $10,000 to each of her eight grandchildren. Prior to that, your client made a single gift of $50,000 to each of her two nieces. If she made a gift of $5,348,000 to her sister in the current year, what amount of gift tax would…