Arthur Rich, a widower, is considering setting up an irrevocable trust (or trusts) with a bank as trustee and his three minor children as beneficiaries. He will fund the trust at $900,000 (or $300,000 each in the case of three trusts). A friend suggested that he might want to consider a January 31 year-end for the trusts. The friend also suggested that Arthur might want to make each trust a complex discretionary trust. Arthur is a little apprehensive about the idea of a trust that would be complex. The friend warned that trust income should not be spent on support of the children. Required: Prepare a memorandum to the tax partner of your firm concerning the above client matter. As part of your analysis, consider the following: What tax reasons, if any, can you think of for having three trusts instead of one? Why do you think the friend suggested a January 31 year-end? What is your reaction to the friends suggestion about the year-end? Which taxpayer, the beneficiary, the grantor, or the trust, is taxed on the income from a discretionary trust? To what extent do trusts serve as income-shifting arrangements? What can you advise Arthur concerning his apprehension about a complex trust? Why did the friend warn against spending trust income for the childrens support?