The trustee of the Epsilon Trust distributed an asset to Telly, a qualifying income beneficiary. The asset's
Question:
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 § 643e), the trust is allowed a $10,000 distribution deduction for this transaction.
b. Assuming that the trustee made an election under § 643e), 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.
Federal Taxation 2016 Comprehensive
ISBN: 9780134104379
29th edition
Authors: Thomas R. Pope, Timothy J. Rupert, Kenneth E. Anderson