Who is responsible to pay the income tax on trust income

Assignment Help Taxation

Reference no: EM133354075

Question: On January 1, 2021 Matthew establishes an irrevocable trust by transferring $1 million of marketable securities into said trust for the benefit of his two sons, Mark and Luke. Each son has an equal and separate share of the trust. Matthew's brother, John, is the Trustee. Matthew retains the powers to substitute or exchange assets of equal value within the trust and the power to borrow from the trust without providing adequate security. Each year, fifty percent of the trust income is paid in equal shares to Mark and Luke. The other 50% is added to the trust principal. The Trustee may distribute principal to Mark and Luke for health, education, support and maintenance. Upon Mark and Luke's death any remaining principal stays in trust for Mark and Luke's children (Matthew's grandchildren), per stirpes. In its first year, ending 12/31/2021, the trust had taxable income of $100,000.
Who is responsible to pay the income tax on trust income in 2021 and why?
Provide an explanation and support your research, explanation and conclusions with primary authority from the tax law (IRC, Regulations, etc).

Reference no: EM133354075

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