With respect to the taxation of trusts in Canada, which of the following is incorrect?

Choose the correct answer.

A. Income earned by the trust and immediately distributed to the trust's unit holders is not subject to income tax in the trust.

B. Funds distributed to the trust's unit holders in excess of the trust's income for the year are called capital distributions and are received tax-free by the unit holders.

C.Funds distributed to the trust's unit holders in excess of the trust's income for the year are called reinvested distributions and are received tax-free by the unit holders.

D.Income distributed by the trust to the trust unit holders retains its character.