Evaluate the taxable income of a trust

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Reference no: EM1377490

A.) Identify the steps in evaluating the taxable income of a trust or estate.

B.) Show the uses and implication of distributable net income.

C.) Last year, Henry sold real estate (basis of $450,000) to Bill (an unrelated party) for $1.8 million, receiving $300,000 in cash and notes for the balance. The notes carry an 8.5 percent rate of interest and mature annually at $500,000 each over three years. Henry did not elect out of the installment method of reporting gain. Before any of the notes mature and when they have a fair market value of $1.3 million, Henry provides them to Jean.

A.) Disregarding interest element, find the tax consequences of the gift?

B.) Consider that instead of making the gift, Henry died. The notes passed to his estate and were later sold by the executor. Evaluate the tax result?

Reference no: EM1377490

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