ExpertMedium1 markMultiple Choice
CPA · Question 57 · Area 4: Entity Taxation
Which of the following characteristics distinguishes a 'Simple Trust' from a 'Complex Trust'?
Which of the following characteristics distinguishes a 'Simple Trust' from a 'Complex Trust'?
Answer options:
A.
A Simple Trust can make charitable contributions.
B.
A Simple Trust must distribute all current income, whereas a Complex Trust may accumulate income.
C.
A Simple Trust has a higher exemption amount than a Complex Trust.
D.
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 must distribute all current income, whereas a Complex Trust may accumulate income.
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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