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GiftLaw Pro Home   >  Chapter 8 - Gift Administration  >  8.2 Charitable Remainder Trusts  >  8.2.2 CRT Payouts and Four-Tier Accounting  >  Basic Quiz

Basic Quiz - 8.2.2 CRT Payouts and Four-Tier Accounting

1. Because charitable remainder trusts (CRTs) are tax-exempt, payments made from them are also tax-exempt.
           
2. Four-tier accounting is the process of taxing the donor, the trust, income beneficiaries and finally the charitable recipient.
           
3. The first level of four-tier accounting is ordinary income.
           
4. Ordinary income payments are those payments received from appreciated property held more than one year.
           
5. Long-term capital gain property is taxed at the second level of four-tier accounting.
           
6. Capital gain tax differs depending on whether the property was held for more or less than one year.
           
7. Tax-free payments are not included in the four-tier accounting structure.
           
8. Municipal bonds are one example of tax-free income producing properties.
           
9. The fourth tier of the four-tier accounting structure is the tax-free return of principal.
           
10. If Tom funds a CRT with $100,000 cash and the trust makes payments to Tom of only principal, Tom's payments will be subject to tier-one taxation.