Question

Under a trust created by the will of the late Reginal, the trust income is to be
distributed as follows:
§ one-quarter to his widow;
§ to a son, aged 26, the amount the trustee considers necessary to meet his educational needs; and
§ the remainder of the income to a son, aged 20, currently serving a three-year sentence for culpable driving.
The net income of the trust estate for the current tax year amounts to $42,000,
of which $4,000 has been applied for the education of the son, aged 26.
Required:
Prepare a trust distribution statement showing how the income of the trust
estate for the current tax year would be assessed. Discuss your answer by
referring to relevant income tax legislation.

Answer 1

Statement of disrtribution of trust income

Net income of the trust	$ 42000
less :- Tax @ 30%	$ 12600
Net income after tax	$ 29400
Distribution of income :-
1/4 to his widow	$ 7350
Son aged 26 for education	$ 4000
Balance to his son aged 20	$ 18050

When trust beneficiaries receive distributions from the trust's principal balance, they do not have to pay taxes on the distribution. ... The trust must pay taxes on any interest income it holds and does not distribute past year-end. Interest income the trust distributes is taxable to the beneficiary who receives it.