Please solve the following problem using the 2016 IRS form 1041 (and schedule K1) for this tax return. The description of the problem is attached as a word document.
tax_return_form_4.docx
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Marion Mosley created the Jenny Justice Trust in 2005 with First Bank named as trustee. For 20
years, the trust is to pay out all its income semiannually to the beneficiary, Jenny Justice. At the
end of the twentieth year, the trust assets are to be distributed to Jenny’s descendants. According
to the trust instrument, capital gains are credited to principal, and depreciation is charged to
principal. For the current year, the irrevocable trust reports the following results:
Amounts Allocable to
Rental income
Corporate Bond Interest
Interest on tax-exempt (non-private activity) bonds
Long-term capital gain on sale of land
Maintenance & repairs of rental property
Property taxes on rental property
CPA’s fee for tax return preparation
Trustee’s fee
Depreciation
Estimated federal income taxes paid from principal
Income
$15,000
27,000
8,000
Principal
11,000 a
1,500
700
500
2,000
2,400
2,000
a The sales price and adjusted basis are $91,000 and $80,000, respectively. The trustee acquired the land in 2006 and
the trustee sold it in November of the current year.
Prepare Form 1041 including any needed Schedule K-1s for the Jenny Justice Trust. Ignore
alternative minimum tax (AMT). The trustee’s address is P.O. Box 100, Southwest City, TX
75000. The identification number of the trust is 74-1234567. Jenny resides at 2 Mountain View,
South City, AL 35000.
…
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