During the current year, Trust S had the following receipts and expenses: Taxable interest $45,000
Tax-exempt interest from municipal bonds 15,000
Trustee fee (2,000)
During the year, $43,500 was distributed to X, the sole income beneficiary.The trust instrument does not require that all trust income be distributed to X annually.Based on these facts, the § 661 (a) distribution deduction available to the trust is

Question

Quizplus · Accepted Answer

According to the given information, the trust had taxable interest income of $45,000 and tax-exempt interest income of $15,000. It also incurred trustee fees of $2,000. Therefore, the trust's total income before distributions is $58,000 ($45,000 + $15,000 - $2,000).

Since $43,500 was distributed to the sole income beneficiary, X, during the year, the distribution deduction available to the trust is $43,500. This means that the trust will only be taxed on the remaining $14,500 ($58,000 - $43,500) of its income, and X will report the entire $43,500 as income on their personal tax return. Therefore, the correct answer is B: $43,500.

During the Current Year, Trust S Had the Following Receipts