A Trust Holds Assets That Will Generate Net Investment Income

question 37

Multiple Choice

A trust holds assets that will generate net investment income (NII) and trigger the additional Medicare taxes. The trustee should:

• A) Distribute all of the NII to trust beneficiaries.
• B) Retain all of the NII every tax year.
• C) Increase the turnover rate of the investments that the entity holds.
• D) Sell the NII assets and invest in high-yield bonds instead.

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Definitions:

Costs of Production

The total expenses incurred in manufacturing a product or providing a service, including raw materials, labor, and overhead.

Resource-Owners' Money Income

The income generated by individuals or entities from renting or providing their owned resources, such as land, labor, or capital, to others for use.

Costs to Business

All expenses incurred by a business in the process of producing goods or services, including both fixed and variable costs.

Distribution of Output

The way in which the total goods and services produced by an economy are allocated or distributed among its population.