The Drabb Trust Owns a Plot of Business-Related Land,basis of $50,000,fair

question 126

Multiple Choice

The Drabb Trust owns a plot of business-related land,basis of $50,000,fair market value of $35,000.Drabb is subject to a 35% marginal income tax rate.Its sole beneficiary,Eddie,is subject to a 15% marginal income tax rate.Drabb's current-year distributable net income is $95,000.What is the most preferable action for the trustee of Drabb to take,considering only the related tax consequences?

• A)Distribute the land to Eddie and make a § 643(e) election.
• B)Distribute the land to Eddie and make no § 643(e) election.
• C)Sell the land to a third party.
• D)Neither sell nor distribute the land.

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Definitions:

Ultimatum Game

A game in experimental economics where one participant proposes a division of a sum of money, and the other can accept or reject the proposal, with rejection meaning neither receives anything.

Behavioral Economists

Investigators who look into how psychological, cognitive, emotional, cultural, and social variables play a role in the economic decisions of individuals and organizations.

Ultimatum Game

A game in economic experiments where one player proposes a division of a sum of money and the second player can accept or reject the proposal. If rejected, both players receive nothing.

Behavioral Economics

A field of study that examines the effects of psychological, cognitive, emotional, cultural, and social factors on the economic decisions of individuals and institutions.