Which of the following statements in relation to trust losses in a discretionary trust is CORRECT?

Select one:

1. Trust losses can be carried forward and offset against any income a beneficiary receives from sources other than the trust.

2. Trust losses can be distributed to beneficiaries, as long as they are first offset against any exempt income of the trust.

3. A discretionary trust can only carry forward losses if it has elected to become a family trust.

4. Trust losses are quarantined inside the trust.

5. None of these