On July 1, 2020, Martin Long Transfers Shares with a Fair

On July 1, 2020, Martin Long transfers shares with a fair market value of $300,000 to a newly established inter vivos trust. His 35 year old son, Shorty Long, is the only beneficiary. Martin's cost for these securities was $170,000. During 2020, the trust receives eligible dividends on the shares of $21,000. All of these dividends are distributed to Shorty. What are the tax consequences of these transactions to Martin, the trust and Shorty?

A) The trust will report dividends received of $21,000 and will claim the dividend tax credit. There will be no tax consequences for Martin or Shorty.
B) The trust will have no income. Shorty will report dividends received of $21,000 which must be grossed up and will claim the dividend tax credit. There will be no tax consequences for Martin.
C) Martin will report a taxable capital gain of $65,000 [(1/2) ($300,000 - $170,000) ]. The trust will have no income. Shorty will report dividends received of $21,000 which must be grossed up and will claim the dividend tax credit.
D) Martin will report a taxable capital gain of $65,000 [(1/2) ($300,000 - $170,000) ]. The trust will report dividends received of $21,000 which must be grossed up and will claim the dividend tax credit. There will be no tax consequences for Shorty.