Stock in Avonictech,Inc.is a major asset of a split-interest trust.The trust is comprised of a single income beneficiary,who is the grantor's husband,and three grandchildren,who collectively constitute the principal beneficiaries (remaindermen)of the split-interest trust.The stock was worth $5 million at the time the trust was created,and the stock recently was sold for $17 million.The trust does not recite how gains on the sale of assets should be allocated.The $12 million gain on sale should be allocated:
A) $3 million to each of the four beneficiaries
B) $12 million to the grantor's husband
C) $12 million to the grandchildren, collectively
D) $6 million to the grantor's husband and $6 million to the grandchildren, collectively

Question

Quizplus · Accepted Answer

The gain on the sale of the principal asset should be allocated to the principal beneficiaries, the grandchildren, as they are the remaindermen of the trust.