The Doyle Trust Reports Distributable Net Income of $100,000 for the Year

question 129

Multiple Choice

The Doyle Trust reports distributable net income of $100,000 for the year and no income from tax-exempt sources. Under the terms of the trust instrument, the trustee must distribute $20,000 to Roger and $20,000 to Sally. After paying these amounts, the trustee can make additional distributions at its discretion. Exercising this authority, the trustee distributes an additional $25,000 to Roger and $50,000 to Sally. How much gross income from the trust must Sally recognize?

• A) $70,000
• B) $60,000
• C) $40,000
• D) $20,000

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Definitions:

Long-term Bank Loans

Long-term bank loans are borrowings from banks with repayment terms extending beyond one year, used for financing significant investments or operations.

Marketable Securities

Financial instruments that can be quickly converted into cash at a reasonably predictable price.

Capital Gains

The profit from the sale of assets or investments, such as shares or property, which exceeds the purchase cost.

Eligible Dividends

Dividends that are designated by corporations to be eligible for a lower tax rate in the hands of individuals, in certain jurisdictions.