The Drabb Trust Owns a Plot of Business-Related Land, Basis

question 59

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 12% marginal income tax rate. Drabb's current-year distributable net income is $95,000. What is the most preferable action for Drabb's trustee 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:

Ingredients

The individual components or substances that are combined to create a final product, especially in food.

Bakery

A place of business where baked goods such as bread, cakes, and pastries are produced and sold.

Additional Costs

Expenses incurred beyond the initial purchase price or budgeted amounts, often unexpected or unplanned for.

Variable Costs

Expenses that change in proportion to the activity or volume of a business, such as materials and labor costs.