Which of the Following Is the Most Accurate Statement Concerning

question 81

Multiple Choice

Which of the following is the most accurate statement concerning the use of trusts in tax planning?

• A)The grantor trust rules allow grantors to shift income into trusts and reduce their own taxes.
• B)Nontax reasons for the use of trusts (such as avoidance of probate)typically outweigh tax reasons for creating trusts today.
• C)The large 15% tax bracket available to trusts allows complex trusts to be used as an income-shifting device.
• D)None of the above statements are correct.

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Definitions:

Subsidiary's Income

The earnings generated by a company that is more than 50% owned by another company, referred to as the parent company.

Straight Line Amortization

A method of writing off the cost of an intangible asset evenly over its useful life.

Equity Method

An accounting approach used to assess the investment in another company, where the investment is initially recorded at cost and subsequently adjusted to reflect the investor's share of net assets and recorded earnings of the investee.

Impairment Test

An examination to determine if an asset's carrying amount exceeds its recoverable amount, and if so, to measure the amount of impairment loss.