Woody wants to transfer some of the income from his investment portfolio to his

Question

Woody wants to transfer some of the income from his investment portfolio to his daughter Wendy, age 10. Woody wants the trust to be able to accumulate income on Wendy’s behalf and to meet any excessive expenses associated with her chronic medical conditions. Furthermore, Woody wants the trust to protect Wendy against his premature death without increasing his Federal gross estate. Thus, Woody provides the trustee with the powers to purchase insurance on his life and to meet any medical
expenses that Wendy incurs. The trust is created in 2008. A whole life insurance policy with five annual pre-
mium payments is purchased during that year. The trustee spends $30,000 for Wendy’s medical expenses in 2018 (but in no other year). Woody dies in 2019. Has the trust been tax-effective? Explain.

Explanation / Answer

Trust is taxable for income. since even if minor child is applicable for 80U income earned by minor child couldn't be clubbed in income of parents.

Further representative entitled to receive or is in receipt of such income on behalf of such minor, lunatic or idiot is taxable for the income.

Hence, trust is taxable for any income earned

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