Because a simple trust by definition is a trust that must distribute all income currently to beneficiaries, a simple trust will never have an income tax liability.

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While a simple trust is required to distribute all its income currently to beneficiaries, it can still incur income tax liability if it has any taxable income that is not distributed or if it earns tax-exempt income that is subject to certain taxes, such as unrelated business taxable income.

Because a Simple Trust by Definition Is a Trust That