A trust established for the benefit of A, age 23, and B, age 13, generated $8,000 of dividend income.The trustee distributed $2,000 to A and $1,500 to B.The taxable income of the trust (before the exemption deduction) is
A)$8,000
B)$6,000
C)$4,500
D)$0

Question

Quizplus · Accepted Answer

The total dividend income of the trust is $8,000, out of which $2,000 was distributed to A and $1,500 was distributed to B. This means that $4,500 ($8,000 - $2,000 - $1,500) of dividend income was not distributed and remained in the trust. This remaining income is subject to taxation at the trust level, as the trust is a separate entity for tax purposes. Therefore, the taxable income of the trust (before the exemption deduction) is $4,500.

A Trust Established for the Benefit of A, Age 23