A simple trust has the following receipts and expenditures for the current year. The trust instrument classifies gains, losses, and trustees fees as part of principal.

Dividends $20,000

Long-term capital gain $15,000

Trustees fees $1,500

Distribution to beneficiary $20,000 a. What is the trusts taxable income under the formula approach of Figure C:14-1?

b. What is the trusts taxable income under the short-cut approach?