A Trust Holds Assets That Will Generate Net Investment Income

Multiple Choice

A trust holds assets that will generate net investment income (NII) and trigger the additional Medicare taxes. The trustee should:

A) Distribute all of the NII to trust beneficiaries.
B) Retain all of the NII every tax year.
C) Increase the turnover rate of the investments that the entity holds.
D) Sell the NII assets and invest in high-yield bonds instead.