D's grandmother places $50,000 in a trust for D at her birth.The trustee may distribute income to D at his discretion.Which of the following is a true statement about the tax consequences of this arrangement?

Question

Quizplus · Accepted Answer

The "kiddie tax" applies to children under the age of 19 (or full-time students under the age of 24) for any unearned income over a certain amount. Since the trustee may distribute income to D at their discretion, any distributed amounts may be subject to the "kiddie tax" as long as D is under the specified age limits. Option A is incorrect because accumulated amounts are not subject to the "kiddie tax" until they are distributed. Option C is incorrect because the trust income is taxed to the trust, not D's parents. Option D is incorrect because income generated by a gift to a minor is taxable.

D's Grandmother Places $50,000 in a Trust for D at Her