Reference no: EM132772081

Problem - Transactions in a Completed Worksheet - A Question - The entity reports the following transactions for the 2020 tax year. The trustee accumulates all accounting income for the year.

Operating income from a business $500,000

Dividend income, all from U.S. corporations (20% tax rate) 30,000

Interest income, City of San Antonio bonds 40,000

Fiduciary fees, deductible portion (15,000)

Net rental losses, passive activity (100,000).

Carryout the tax computations to two decimal places and round the final tax liability to the nearest dollar.

Compute the Federal income tax liability for the Valerio Trust by providing the following amounts:

The amount of the fiduciary's gross income taxed at 20% for the Valerio Trust is $ 30,000

The fiduciary taxable income taxed at ordinary rates for the Valerio Trust is $484,900

The Federal income tax liability for the Valerio Trust is $_________________

Feedback: Congress's desire to stop trusts from being used as income-shifting devices has made the fiduciary entity the highest-taxed taxpayer in the Code. The entity reaches the 37 percent marginal Federal income tax rate in 2020 once taxable income exceeds $12,950, so the grantor's ability to shift income in a tax-effective manner is nearly eliminated.