TAX RETURN #3

FIDUCIARY INCOME TAX RETURN

Goosebury Trust

Federal Tax Return

FACTS

The Goosebury Trust was created on May 1, 2000 at the death of Arthur Goosebury. There are two named trust beneficiaries: Arty Jones and Bessie Gloss. The trust instrument requires the trustee to distribute $40,000 to Arty every year. In the current year the trust actually distributes $60,000 to Arty and $60,000 to Bessie. No other distributions are made. The trust requires that all cost recovery, net capital gains and losses, and fiduciary fees are allocable to corpus.

Goosebury trust activity for the current tax year is as follows:

Qualified dividend income $20,000

Taxable interest income $60,000

Tax-exempt interest income $40,000

Net long-term capital gain $50,000

Fiduciary fees $12,000

The net long-term capital gain consists of one transaction relating to XYZ stock which was reported on form 1099-B including sales proceeds of $83,000 and a cost basis of $33,000. In computing DNI, the trustee properly allocated all deductible fiduciary fees to taxable interest income. Of course, all nondeductible fiduciary fees are allocated to tax-exempt interest income.

The trustee paid $6,000 in estimated taxes for the current year. Any refund shall be credited toward the succeeding tax year.

The trusts Federal identification number is 22-2222222. The trustee, Utah State Bank, is located at 500 North Walnut Street, Cedar City, UT 84720. Arty lives at 325 West Crazy Drive, Cedar City UT 84720 and his social security number is 111-11-1111. Bessie lives at 124 East Silly Avenue, Cedar City UT 84720 and her social security number is 222-22-2222. Both trust beneficiaries are U.S. citizens.

REQUIRED

1. Prepare the following spreadsheets:
   1. Accounting income, Taxable income, DNI and distribution deduction spreadsheet
   2. DNI received spreadsheet, and
   3. Beneficiary Taxation Spreadsheet.
2. Using the above spreadsheets prepare the 2020 fiduciary income tax return for the Goosebury Trust. No tax preparation software is allowed in preparing this return.

CHECK FIGURES

Taxable income (Form 1041, page 1, line 23): $49,900.

Tax Due (Form 1041, page 1. Line 28): $4,329.

GRADING

This assignment is worth 100 points toward your final grade. Below is a list of the required schedules and forms and their potential points. Grade is determined as follows: Total points earned divided by Total Possible Points multiplied by 100.

Form Possible Points

Spreadsheet 1 23

Spreadsheet 2 9

Spreadsheet 3 15

Form 1041 page 1 23

Form 1041 page 2 20

Form 1041 page 3 10

Schedule D page 1 7

Schedule D page 2 27

Form 8960 18

Schedule K-1 Arty 13

Schedule K-1 Bessie 13

Total Possible Points 178

Fiduciary Income Tax Return Spreadsheets The following three spreadsheets need to be used in completing the Fiduciary Income Tax return. They will be graded along with the tax return. 1. The first spreadsheet is used to detrmine accounting income, taxable income, DNI, and the distribution deduction. 2. The 2nd spreadsheet allocates DNI among the beneficiaries. 3. The 3rd spreadsheet is used to determine the amount of income item allocated to each beneficiary and shown on schedule k-1. Item Totals Accounting Income Taxable Income Distributable Net Income Distribution Deduction Dividend income Taxable interest income Exempt interest income Net long-term capital gain Fiduciary fees Personal exemption Accounting Income Taxable Income before the Distribution Deduction $ S STEP 1 STEP 2 Exemption Corpus Capital Gain/Loss Net Exempt Income Distributable Net Income Distribution Deduction S STEP 3 Entity Taxable income STEP 4 DNI received: Arty Bessie Total First-Tier Second-Tier Totals Income Type Beneficiary Taxation Amount Received DNI Received Interest Income Tax Exempt Interest Income Dividend Income Totals Bessie Fiduciary Income Tax Return Spreadsheets The following three spreadsheets need to be used in completing the Fiduciary Income Tax return. They will be graded along with the tax return. 1. The first spreadsheet is used to detrmine accounting income, taxable income, DNI, and the distribution deduction. 2. The 2nd spreadsheet allocates DNI among the beneficiaries. 3. The 3rd spreadsheet is used to determine the amount of income item allocated to each beneficiary and shown on schedule k-1. Item Totals Accounting Income Taxable Income Distributable Net Income Distribution Deduction Dividend income Taxable interest income Exempt interest income Net long-term capital gain Fiduciary fees Personal exemption Accounting Income Taxable Income before the Distribution Deduction $ S STEP 1 STEP 2 Exemption Corpus Capital Gain/Loss Net Exempt Income Distributable Net Income Distribution Deduction S STEP 3 Entity Taxable income STEP 4 DNI received: Arty Bessie Total First-Tier Second-Tier Totals Income Type Beneficiary Taxation Amount Received DNI Received Interest Income Tax Exempt Interest Income Dividend Income Totals Bessie