The Trustee of the Epsilon Trust Distributed an Asset to Telly

question 86

Multiple Choice

The trustee of the Epsilon Trust distributed an asset to Telly, a qualifying income beneficiary. The asset's basis to the trust was $10,000, and its fair market value on the distribution date was $25,000. Which of the following statements is true?

• A) Assuming that the trustee made an election under § 643(e), the trust is allowed a $10,000 distribution deduction for this transaction.
• B) Assuming that the trustee made an election under § 643(e), Telly recognizes $10,000 gross income on the distribution.
• C) Lacking any election by the trustee, the trust recognizes $15,000 gross income on the distribution.
• D) Lacking any election by the trustee, Telly's basis in the asset is $10,000.
• E) Lacking any election by the trustee, Telly's basis in the asset is stepped up to $25,000.

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Definitions:

Foreign Currency Approach

A method used in global finance and investment analysis that involves evaluating investments or financial statements in a foreign currency.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time, used to evaluate the profitability of an investment.

Pakistani Rupees

the official currency of Pakistan, symbolized as PKR.

Yankee Bond

A bond issued by a foreign entity in the United States, denominated in U.S. dollars, and subject to American securities laws.