The estate of Munju was formed on 1 July 2014 and adopted an initial fiscal year ending on 30 June 2015. Arekay (a single 17 year old cash basis taxpayer) is the sole beneficiary of the estate. The cash activity for several relevant periods is shown below:
Total for 7/1/2014-6/30/2015 7/1/2014-12/31/2014 1/1/20015-6/30/2015
Rental income on land 800,000 400,000 400,000
Taxable interest income, 700,000 350,000 305,000
California main bond interest income 300,000 150,000 150,000
Long term capital gains from stock 400,000 200,000 200,000
Gross income totals 2,200,000 1,100,000 1,100,000
Property taxes on the land (100,000) (50,000) (50,000)
Fiduciary fees for general services
To the estate (80,000) (40,000) (40,000)
Distributions to Arekay, (800,000) (400,000) (400,000)
Net cash flow before income taxes 1,220,000 610,000 610,000
Strangely enough, NO cash activity occurred between 1 July 2015 through 31 December 2015. Under CA law, 50% of fiduciary fees are charged to corpus and 50% to income for purpose of computing accounting income. The will contains no “special provisions” regarding the allocation of capital gains.
A) How much and what type of income and/or expense from the Estate must Arekay report on her 2014 individual income tax return?
B) How much and what type of income and/or expense from the Estate mush Arekay report on her 2015 individual income tax return?
C) What is the taxable income for the Estate of Munju’s fiscal year ended 30 June 2015?
D) Ignoring “alternative minimum tax”, what is the net tax liability for the Estate of Munju’s initial fiscal year ended 30 June 2015 (OK to use the 2014 tax rate schedule)?