How does statute 677 apply to the facts below by answering the the three questions? Please indicate what part of the statute provides clarity to the specific question.

1. G created an irrevocable trust, with ordinary income to G for life, remainder to B, and unrelated person. Except for the right to receive income, G did not retain any powers that would cause him to be treated as the owner under IRC sections 671 and 677. Local law requires capital gains to be applied to corpus. The trust had the following items of gross income and deductions for the current year:

Dividends: $5,000.00

Capital Gains: $1,000.00

Expenses allocable to income $ 200.00

Expenses allocable to corpus: $ 100.00

a) What are the tax consequences to the trust of the transactions described above?

b) What are the tax consequences to the grantor of the transactions described above?

c) What are the tax consequences to the trust's beneficiaries of the transactions described above?