A simple trust has the following receipts and expenditures for the current year. The trust instrument classifies gains, losses, and trustee’s fees as part of principal.
Dividends …………………………………. $20,000
Long-term capital gain ……………………. 15,000
Trustee’s fees ……………………………… 1,500
Distribution to beneficiary ………………… 20,000
a. What is the trust’s taxable income under the formula approach of Figure?
b. What is the trust’s taxable income under the short-cut approach?