After Having Been Divorced for Several Years, Mrs

After having been divorced for several years, Mrs. Blended has remarried a man with three children of his own. She has set up a revocable trust in which she deposited funds that she inherited when her mother died, so that the monies will go uncontested to her two biological children in the event of her own death. These two adult children are the only beneficiaries of the trust. Mrs. Blended has no plans to touch any of the money in the trust unless circumstances demand it in the future. The trust is invested in a mutual fund that paid $500 in dividend income and distributed $3,000 in long-term capital gain income to the trust this year. Which of the following statements is true regarding the tax treatment of these distributions?

A) The distributions will not be taxed at this point; they will be taxed only when Mrs. Blended or her beneficiaries make withdrawals from the trust.
B) Assuming her two adult children are equal beneficiaries, each one is responsible for paying tax on 50% of the income to the trust, or $1,750.
C) Mrs. Blended must pay taxes on the $3,500 in distributions.
D) The distributions will not be taxed at this point; they will be taxed as part of the estate upon Mrs. Blended's death.

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