which of the following statements regarding taxation of trust income is correct? 1. a trust is taxed on retained income, but beneficiaries are not taxed on trust income disbursed to them. 2. a trust is taxed on income it retains, and beneficiaries are taxed on trust income distributed to them. 3. a trust is taxed on income it distributes to beneficiaries,and beneficiaries are taxed on income the trust retains. 4. the trust and beneficiaries are both taxed on all trust income.