The Kapoor Trust Is Your Client Trust Agreement Provisions Trust Accounting Income
Fees and Capital Gains

question 42

Essay

The Kapoor Trust is your client. Complete the chart below, indicating Kapoor's trust accounting income for each of the alternatives.
$\begin{array}{llr} \text { Interest income, taxable } & \$ 60,000\\ \text { Interest income, tax-exempt } &30,000\\ \text { Interest income, tax-exempt but AMT preference} &10,000\\ \text {Long-term capital gain } &40,000\\ \text { Trustee fee} &5,000\\\end{array}$



Trust agreement provisions Trust accounting income
Fees and capital gains allocable to
corpus ______________________
Capital gains allocable to corpus, one-
half of fees allocable to income ______________________
Capital gains allocable to income, silent
concerning allocation of fees ______________________
Fees and exempt income allocable to corpus,
silent concerning allocation of capital gain/loss ______________________

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Definitions:

Negotiable Instruments

Financial instruments that are transferable by endorsement or delivery, allowing the holder to take possession of the funds, such as checks or promissory notes.

UCC

The extensive legal provisions of the Uniform Commercial Code cover all forms of commercial transactions occurring in the United States.

Commercial Transactions

Deals or agreements between parties that involve the exchange of goods, services, or funds in the course of business operations.

Common Law

A legal system characterized by judicial decisions that are recognized as binding, forming a body of law developed through court decisions over time.