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

question 4

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 taxable amount of the Megan's tier-2 distribution?

• A)$7,500
• B)$6,250
• C)$15,000
• D)$22,500

---

Definitions:

Contribution Margin

The difference between sales revenue and variable costs of a product or service, used to cover fixed costs and generate profit.

Fixed Manufacturing Overhead

The set costs associated with operating a manufacturing facility that do not vary with the level of production, including salaries of managers and depreciation of equipment.

Unit Product Cost

The total cost (both fixed and variable) associated with producing a single unit of a product.

Additional Contribution Margin

The increase in contribution margin generated by an additional unit of sales, reflecting the revenue minus variable costs for that unit.