Writing Assignments1. Describe the structure and tax treatment of the following trusts eligible to hold S corporation stock: (a) Grantor trust (b) Voting trust (c) Qualified subchapter S trus

Writing Assignments

1. Describe the structure and tax treatment of the following trusts eligible to hold S corporation stock:

(a)    Grantor trust

(b)   Voting trust

(c)    Qualified subchapter S trust (QSST)

(d)   Electing small business trust (ESBT)

2. Describe and distinguish the purpose and tax treatment of the nonexempt employee trusts known as “Rabbi” and “Secular” trusts.

3. Jim creates an irrevocable trust retaining the right to use the trust principal for 10 years. At the time the trust terminates, the remaining principal is distributed to his daughter Jessica.  Jim places his primary residence in the trust valued at $750,000 when the Sec. 7520 interest rate is 4 percent. The actuarial tables indicate that the income right for ten years is valued at $243,327. Describe the income, gift and estate tax consequences for Jim under the following circumstances:

(a)    Jim survives the ten-year term and the home is then worth $1,400,000..

(b)   Jim dies in seven years and the home is worth $1,200,000 at the time of his death.