36. Trust DNI is $10,000. This consists of $3,000 tax exempt interest and $7,000 of taxable interest. The trustee distributes $5,000 to the sole trust beneficiary. The beneficiary's distribution is deemed to consist of

a. zero assuming the trustee elects to have all of the income taxed to the trust.

b. taxable interest of $2,500 and tax exempt interest of $2,500.

c. taxable interest of $3,500 and tax exempt interest of $1,500.

d. taxable interest of $3,500.

37. Mary is the sole beneficiary of a simple trust to whom the trustee is required to distribute all current trust income by the terms of the trust agreement. During the taxable year of the trust it receives $10,000 of DNI(current FAI ). The trustee makes no distributions to Mary notwithstanding the terms of the trust agreement.

a. Mary reports the DNI on her 1040 but has a good claim for refund on the income tax she paid on the DNI.

b. Mary is not taxable on the DNI.

c. Mary is taxable on the DNI.

d. Mary is taxable on $9,700 of the DNI.