Apple Trust Reports Net Accounting Income of $40,000, All from Taxable

question 1

Multiple Choice

Apple Trust reports net accounting income of $40,000, all from taxable sources. The trustee is required to distribute $15,000 annually to Megan. The trustee also makes discretionary distributions of $30,000, $7,500 to Megan and $22,500 to Caroline. The trust pays $5,000 of the discretionary distributions from corpus. What is the amount of the distribution deduction?

• A)$40,000
• B)$45,000
• C)$15,000
• D)$30,000

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Definitions:

Tax Revenue

The revenue that governments acquire from taxes.

Capitalism

An economic system characterized by private ownership of the means of production, where investments, production, distribution, income, and prices are determined mainly by competition in a free market.

Socialism

An economic and political system where the means of production, distribution, and exchange are owned or regulated by the community as a whole.

Negative Income Tax

A proposed form of welfare where individuals earning below a certain threshold receive supplemental pay from the government instead of paying taxes.