Sally Transfers Property to a Revocable Trust

question 98

Multiple Choice

Sally transfers property to a revocable trust. Under the terms of the trust agreement, Allison is to receive income for ten years at which time the remainder is to go to Tom. During the year, the trust earns $10,000 in corporate bond interest income and recognizes a capital gain of $20,000. The interest is distributed to Allison and the capital gain is properly allocated to principal. Allison (not Sally) will pay tax on

• A)$0.
• B)$10,000.
• C)$20,000.
• D)$30,000.

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Definitions:

Sensation

The process of detecting physical stimuli from the environment and translating them into neural signals that can be interpreted by the brain.

Wavelength

The distance between successive peaks of a wave, often used in the context of light, sound, and electromagnetic waves.

Hue

A color or shade in the spectrum, defined by its dominant wavelength.

Brightness

A visual perception that describes how light or dark a color appears; can also refer to the intensity of light.