An inter vivos trust can designate amounts to be deemed not paid when they are, in fact, paid or payable to beneficiaries. One reason for doing this would be to have the income taxed at a lower rate in the trust.

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An inter vivos trust cannot designate amounts to be deemed not paid when they are, in fact, paid or payable. The taxation of trust income is based on actual distributions to beneficiaries or income retained by the trust, not on designations contrary to the factual situation.

An Inter Vivos Trust Can Designate Amounts to Be Deemed