A simple trust has the following receipts and expenditures for 2015. The trust instrument is silent with respect to capital gains, and state law concerning trust accounting income follows the Uniform Act. Assume the trustee’s fee is charged equally to income and to principal.
Corporate bond interest ………………………… $40,000
Tax-exempt interest …………………………….. 9,000
Long-term capital gain …………………………. 5,000
Trustee’s fee ……………………………………. 2,000
Distribution to beneficiary ……………………… 48,000
a. What is the trust’s taxable income under the formula approach of Figure?
b. What is the trust’s tax liability?