The grantor set up a trust, income to a daughter, remainder to a grandson. To the extent that trust income is used to satisfy the grantor's legal obligation to pay for his daughter's high school education, Subchapter J rules are ignored, and the income is taxed to the grantor.

Question

Quizplus · Accepted Answer

According to Subchapter J of the Internal Revenue Code, income earned by a trust is taxed to the beneficiary who is entitled to receive it. However, if the trust income is used to satisfy the grantor's legal obligation, the income is taxed to the grantor and Subchapter J rules are ignored. Therefore, the statement is true.

The Grantor Set Up a Trust, Income to a Daughter