Apply Income Distribution Deduction Rules Practice Test

Redwood Trust is a calendar-year complex trust. In 2025, it has $130,000 of taxable income after deductions (excluding any income distribution deduction) and $10,000 of tax-exempt interest. The trustee distributes $100,000 in cash to beneficiaries during 2025 and makes no charitable distributions. Under Internal Revenue Code Sections 661–662, what is the allowable income distribution deduction for 2025 (ignore any separate tax-exempt income allocation rules)?

Olive Trust is a calendar-year complex trust. For 2025, it has $125,000 of taxable income after deductions (excluding any income distribution deduction). It distributes $40,000 in cash during 2025 and elects under Internal Revenue Code Section 663(b) to treat $90,000 paid on February 15, 2026 as paid in 2025. There is no tax-exempt income and no charitable distribution. Under Internal Revenue Code Section 661, what is the allowable income distribution deduction for 2025?