Question

Taxpayer has the following questions which require you to explain your answers: A. He has set up a revocable trust for himself and his wife, and put all his Pepsi stock in the trust. How is it to be taxed? Explain.

Answer 1

The following points will help for the accountant to know how can a revocable trust be charged:

(a) Income accumulated in trust for the benefit of unborn or unascertained persons or persons with contingent interests;

(b) Income accumulated or held for future distribution under the terms of the will or trust;

(c) Income which is to be distributed currently by the fiduciary to the beneficiaries, and income collected by a guardian of an infant which is to be held or distributed as the court may direct;

(d) Income received by estates of deceased persons during the period of administration or settlement of the estate; and

(e) Income which, in the discretion of the fiduciary, may be either distributed to the beneficiaries or accumulated.