Grantor has established a trust, naming a bank as trustee. Pursuant to the terms of the trust docu Grantor is to receive all of the income generated by the trust assets during his life. Grantor may withdraw assets from the trust or place additional assets into it. The assets placed into the trust c of Grantor's mutual fund portfolio, personal residence, a rental property located in another state, a two installment notes held by Grantor. Upon Grantor's death, all of the assets remaining in the tru to be distributed to Grantor's two children. Which of the following statements is/are correct? 1. Upon the transfer of the installment notes to their trust, any deferred gain will be recognized as
Grantor has established a trust, naming a bank as trustee. Pursuant to the terms of the trust docu Grantor is to receive all of the income generated by the trust assets during his life. Grantor may withdraw assets from the trust or place additional assets into it. The assets placed into the trust c of Grantor's mutual fund portfolio, personal residence, a rental property located in another state, a two installment notes held by Grantor. Upon Grantor's death, all of the assets remaining in the tru to be distributed to Grantor's two children. Which of the following statements is/are correct? 1. Upon the transfer of the installment notes to their trust, any deferred gain will be recognized as
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Grantor has established a trust, naming a bank as trustee. Pursuant to the terms of the trust document,
Grantor is to receive all of the income generated by the trust assets during his life. Grantor may
withdraw assets from the trust or place additional assets into it. The assets placed into the trust consist
of Grantor's mutual fund portfolio, personal residence, a rental property located in another state, and
two installment notes held by Grantor. Upon Grantor's death, all of the assets remaining in the trust are
to be distributed to Grantor's two children.
Which of the following statements is/are correct?
1. Upon the transfer of the installment notes to their trust, any deferred gain will be recognized as
taxable income.
2. After the transfer, the income from the mutual funds will be reported on Grantor's tax return.
3. Upon the transfer of the rental property to the trust, all excess prior years' depreciation will be
recaptured.
4. After the transfer, the $250,000 exclusion from capital gain remains available for the principal
residence.
1 and 3
2 and 4
4 only
1, 2, and 3
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