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THIS IS A TAXATION PROBLEM- PLEASE ASSIST!!

Prepare the 2014 fiduciary income tax return (Form 1041) for the Blue Trust, and prepare a Schedule K1 for Betty Blue. Omit all alternative minimum tax computations. Use the five-step procedure for computing the solution.

CHECK ANSWER: taxable income = -300

The year's activities of the trust include the following.

Dividend income, all U.S. stocks $50,000

Taxable interest income 10,000

Tax-exempt interest income 15,000

Fiduciary's fees 4,000

The trust and Betty both use the calendar tax year. Under the terms of the trust instrument, fiduciary's fees are allocated to income. The trustee must distribute all of the entity's accounting income to Betty Blue by February 15 of the following year. The trustee followed this charge and made no other distributions during the year. Fiduciary's fees properly were assigned as an offset to taxable interest income.

The trust was created on July 8, 1990. There are no tax credits for the year, and none of the entity's income was derived from a personal services contract. The trust has no economic interest in any foreign trust. Its Federal identification number is 11-1111111.

The trustee, Hoover State Federal Bank, is located at 4959 Cold Harbor Boulevard, Mountain Brook, AL 35223. Its employer identification number is 98-7654321. Betty lives at 67671 Crestline Road, Birmingham, AL 35212. Her Social Security number is 123-45-6789.

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