The Roz Trust Has Distributable Net Income for the Year

question 89

Multiple Choice

The Roz Trust has distributable net income for the year of $100,000 and no income from tax-exempt sources. Under the terms of the trust instrument, the trustee must distribute $30,000 to Roger and $30,000 to Sally. After payment of these amounts, the trustee is empowered to make additional distributions at its discretion. Exercising this authority, the trustee distributes an additional $40,000 to Roger and $40,000 to Sally. How much income from the trust must Sally recognize?

• A) $90,000.
• B) $60,000.
• C) $50,000.
• D) $40,000.

---

Definitions:

Fair Value

The proceeds from the sale of an asset or the outlay to move a liability in a non-chaotic market operation on the date of gauging.

Subsidiary

A company controlled by another company, termed as the parent company, usually through majority share ownership.

Disclosure

The process of providing financial and other significant information about a company's operations, financial condition, and management to stakeholders.

Fair Market Value

The cost at which an asset would be sold in an open market scenario, involving a buyer and a seller who are both willing to transact and are well-informed about the essential details.