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:

Repairs

The process of restoring a damaged, broken, or failed device, equipment, or part to good working condition.

Hydraulic Car Smasher

A machine designed to compress and crush cars using hydraulic pressure for purposes such as recycling or disposal.

Marginal Cost

The extra cost incurred by producing one additional unit of a product or service.

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The process of discarding or recycling automobiles that are no longer in use or are considered waste.