Which of the Following Statements Regarding the Taxation of a Trust

question 101

Multiple Choice

Which of the following statements regarding the taxation of a trust is incorrect?

• A)An irrevocable trust's income is taxed to the grantor.
• B)Trusts are generally not taxed at favorable rates for income shifting.
• C)Trusts are not subject to double taxation.
• D)A trust's long-term capital gains are taxed at a top rate of 15%.

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Definitions:

Security Funds

Financial reserves set aside to cover potential losses or liabilities, often used in contexts such as investments, insurance, and real estate.

Stop-Payment Order

An order by a bank customer to his or her bank not to pay or certify a certain check.

Subsequent Checks

Checks issued or actions taken following the initial or primary ones, typically as part of a series or sequence.

Drawer's Account

Refers to the bank account from which a check is drawn or payable.