1. A CRT distributes its required $80,000 annuity to the individual (not a qualified charity)beneficiary for the current year. The CRT has 5,000 of ordinary interest income remaining inthe trust fro

1.   A CRT distributes its required $80,000 annuity to the individual (not a qualified charity)

beneficiary for the current year. The CRT has 5,000 of ordinary interest income remaining in

the trust from prior tax years and has the following items of income and capital gain for the

current year:

• Ordinary interest income………….…..$40,000

• Qualified dividend income……………$ 8,000

• Short-term capital gain………………..$20,000

• Long-term capital gain………………..$15,000

Calculate the tax treatment to the individual beneficiary for the current year as a result of the

$80,000 distribution.

2.   David Donor places $2.5 million in a charitable lead trust that must provide $150,000

annually to a public charity for 24 years. When the trust terminates, the remaining principal

is distributed to David’ daughter, Darlene. At the current (when this course was written) Sec.

7520 interest rate of 4 percent, the present value of the lead interest is $2,287,050 and the

value of the remainder is $212,950. Distinguish the income, gift, and estate tax treatment if

the CLT is designed as a grantor trust versus a nongrantor trust.