ExpertEasy1 markMultiple Choice
CPA · Question 42 · Area II: Entity Tax Compliance
Which of the following requires a trust to be classified as a 'Complex Trust' for a given tax year?
Which of the following requires a trust to be classified as a 'Complex Trust' for a given tax year?
Answer options:
A.
It distributes all income currently.
B.
It has no charitable beneficiaries.
C.
It distributes corpus (principal) during the year.
D.
It has a standard exemption of $300.
How to approach this question
Recall Simple vs Complex Trust rules. Simple: Distributes all income, no corpus, no charity. Complex: Accumulates income, OR distributes corpus, OR has charitable beneficiaries.
Full Answer
C.It distributes corpus (principal) during the year.✓ Correct
C
IRC §651 vs §661. A complex trust is any trust that does not qualify as a simple trust. A simple trust cannot distribute corpus.
Common mistakes
Confusing the exemption amounts ($300 vs $100).
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