Which of the following characteristics distinguishes a 'Simple Trust' from a 'Complex Trust'?

Answer options:

A Simple Trust can make charitable contributions.

A Simple Trust must distribute all current income, whereas a Complex Trust may accumulate income.

A Simple Trust has a higher exemption amount than a Complex Trust.

A Simple Trust is taxed as a corporation.

How to approach this question

Simple Trust Rules: 1. All income out. 2. No charity. 3. No corpus out. If you break any rule, you are Complex.

Full Answer

B.A Simple Trust must distribute all current income, whereas a Complex Trust may accumulate income.✓ Correct

A Simple Trust is required to distribute all of its income currently, cannot make charitable contributions, and cannot distribute principal (corpus). A Complex Trust can do any of these things.

Common mistakes

Thinking simple trusts can give to charity.

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