The Testa Trust Was Terminated This Year and Chip,the Beneficiary

question 130

Multiple Choice

The Testa Trust was terminated this year and Chip,the beneficiary of the corpus,received all of the trust assets.The trust reported a $10,000 net operating loss for the current tax year;this was the only tax year in which the trust operated a business.Testa has one income beneficiary,Flo.As a result of these transactions:

• A)Flo and Chip each report a $5,000 NOL on their Forms 1040.
• B)Chip claims the $10,000 NOL on his Form 1040.
• C)Flo claims the $10,000 NOL on her Form 1040.
• D)The $10,000 NOL is lost forever.

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Definitions:

Joint Return

A tax return filed collectively by married couples, combining their incomes, exemptions, and deductions.

Taxable Income

The portion of income that is subject to taxation according to the laws and regulations of the taxing authority.

Standard Deduction

A fixed dollar amount that reduces the income on which you are taxed, varying by filing status and adjusted each year for inflation.

Joint Return

A combined tax return filed by married partners or certain partners in a civil union, pooling their incomes and deductions.