Case 4: Tax Form for Trust -1041 (2022)

Requirement: Compute the 2022 fiduciary income tax return (Form 1041) and Federal income tax for the Green Trust. Prepare a spreadsheet solution to make your computations. Then complete a Form 1041 (pages 1-3) for the entity and a schedule K-1 for beneficiary Marcus.

In addition, determine the amount and character of the income and expense items that each beneficiary must report for the year. Trust is not subject to the AMT. The years activities of the trust include the following.

Dividend income, all qualified U.S. stocks $10,000

Taxable interest income 50,000

Tax-exempt interest income 20, 000

Net long-term capital gain, incurred 11/1 25,000

Trustees fees 6,000

Other Information:

Under the terms of the trust instrument, cost recovery, net capital gains and losses, and administrative fees are allocable to corpus. The trustee is required to distribute $25,000 to Marcus every year. For this year, trustee distributed $40,000 to Marcus and $40,000 to Marcus sister, Ellen Hayes. No other distributions were made.

In computing DNI, the trustee properly assigned all of the deductible trustee fees to the taxable interest income.

The trustee paid $4,000 in estimated taxes for the year on behalf of the trust. Any resulting refund is to be credited to the next tax year. The exempt income was not derived from private activity bonds.

Net investment income tax for $25,000 Net long-term capital gain is $435 (bring this amount to form 1041, page 2, Schedule G-Part I, line #5 Net investment income tax).

The trust was created on December 14, 1993. It is not subject to any recapture taxes, nor can it claim any tax credits. Noe of its income was derived under a personal services contract. The trust has no economic interest in any foreign trust. Its federal identification number is 11-1111122.

Thre trustee, Wisconsin State National Bank, is located at 3100 East Wisconsin Avenue, Milwaukee, WI 53201. Marcus lives at 9880 East North Avenue, Shorewood, WI 53211. His social security number is 123-45-6788. Ellen lives at 6772 East Oklahoma Avenue, Milwaukee, WI 53204. Her social security number is 987-65-4321.

Hint & Self-check numbers Tax-exempt income/Total gross income = 25%, then the allocated admin fee to tax-exempt income should be $1,500.

1041, page 1, Line #21: Exemption is $100

1041, page 1, line#23: Taxable income = 24,900, Line #24: Total tax $4,310

1041, page 2, 1a, $3,875