E.39 Income taxation of trusts and estates Flashcards

The tax return filed by trusts and estates to report income, deductions, and distributions to beneficiaries.

A trust in which the grantor retains control over the trust’s assets and is taxed on its income as if it were their own.

A trust that must distribute all income annually to beneficiaries and does not make charitable contributions.

A trust that may retain income, distribute principal, or make charitable contributions.

The income amount that a trust or estate can distribute to beneficiaries while maintaining tax efficiency.

A deduction available to trusts and estates for the income distributed to beneficiaries, reducing taxable income at the entity level.

A tax rule that applies to distributions from certain accumulated income in foreign or domestic trusts, potentially increasing beneficiaries’ tax liability.

A federal tax on the transfer of wealth from a deceased person’s estate to heirs, applied above certain exemption thresholds.

A tax imposed on transfers to beneficiaries who are at least two generations younger than the grantor, to prevent tax avoidance through skipped generations.

The adjustment of an inherited asset’s cost basis to its fair market value at the date of the decedent’s death, reducing capital gains tax for heirs.