On January 1 of the Current Year, Mandeep Gill Transferred

On January 1 of the current year, Mandeep Gill transferred interest earning securities with a cost of $95,000 and a fair market value of $250,000 to a family trust for no consideration. One-half of the income of the trust is allocated to his 12 year old son, and the other half to his wife. The trust earns $7,000 in interest income during the year. What will the tax consequences of these transactions be to Mandeep?

A) Mandeep will have a taxable capital gain of $77,500 and will have attributed interest income of $7,000.
B) Mandeep will not report a taxable capital gain on the transfer, but the interest income of $7,000 will be attributed to him.
C) Mandeep will have a taxable capital gain of $77,500. No interest income will be attributed to him.
D) Mandeep will have a taxable capital gain of $77,500 and the interest income allocated to Mrs. Gill of $3,500 will be attributed to him.