Melanie owns units of a mutual fund. She receives a cash distribution of $100 from the fund. She believes that she will not be taxed on the distribution if she reinvests it in additional units of the fund. Is she right? a) Yes b) Yes, but only if the mutual fund is constituted as a trust c) Yes, but only if the mutual fund is constituted as a corporation d) No Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.

Melanie owns units of a mutual fund. She receives a cash distribution of $100 from the fund. She believes that she will not be taxed on the distribution if she reinvests it in additional units of the fund. Is she right? a) Yes b) Yes, but only if the mutual fund is constituted as a trust c) Yes, but only if the mutual fund is constituted as a corporation d) No Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.

SWFT Corp Partner Estates Trusts

42nd Edition

ISBN:9780357161548

Author:Raabe

Publisher:Raabe

Chapter20: Income Taxation Of Trusts And Estates

Section: Chapter Questions

Problem 12DQ

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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
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 ?
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Henry wants to establish a trust for his financially challenged adult daughter. He wants to contribute annually to the trust, but his daughter would receive only the trust income. The remainder would go to his grandchildren (her children) at her death. Henry wants the daughter to receive all the earnings from the trust with no restrictions. He realizes that she will probably just squander the money she receives but wants to otherwise protect her from her creditors. Which of the following trusts would you recommend Henry establish for the benefit of his daughter? A) An irrevocable trust, including spendthrift provisions B) A Section 2503(b) trust C) A Section 2503(c) trust D) A support trust
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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.
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’. He is approached by Ronald, an investment broker, 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 making a loss of $700,000. With only $300,000 remaining, Joseph is now insolvent and Ronald has fled the country. Advise the beneficiaries of the trust.
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A client approached you with a question about the tax consequences of setting up an irrevocable trust for his two grandchildren to attend college. Please respond to the following: Discuss the tax issues or consequences of the generation-skipping provision and a direct gift to the grandchildren instead of creating the trust. Make at least two recommendations to support either a direct gift to the grandchildren or the creation of the trust.
George cashed in a savings bond that had earned $700 in interest. His tax bracket is 14%, and his state charges 7% on investment income. How much tax will George pay on the interest from the bond? $0. $49. $98. O $63. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
(Case Study Question) Henry's oldest son has few financial resources. Henry would like to contribute annually to a trust, with his son only receiving the trust income. The remainder of the trust would go to his grandchildren (his son's children) at his son's death. Henry wants his son to receive all the earnings from the trust with no restrictions. He realizes that his son will likely squander trust income he receives but wants to otherwise protect his son from his creditors. Which of the following trusts would you recommend that Henry establish for the benefit of his son? A) An irrevocable trust, including spendthrift provisions B) A support trust C) A Section 2503(b) trust
Which of the statements concerning retirement accounts is true? Since Roth IRAs are funded with post‑tax dollars, they are never as attractive as pre‑tax traditional IRAs. Contributions to personal retirement accounts remain the property of the individual or heirs, but Social Security payments are transferred to others. Individuals can allocate the funds in IRAs, 401(k)s, Roth IRAs, and Social Security accounts according to their risk preferences. Individuals do not pay income tax on Social Security contributions, but there are no tax benefits tied to personal retirement accounts.