Apple Trust reports net accounting income of $40,000, all from taxable sources. The trustee is required to distribute $15,000 annually to Megan. The trustee also makes discretionary distributions of $30,000, $7,500 to Megan and $22,500 to Caroline. The trust pays $5,000 of the discretionary distributions from corpus. What is the taxable amount of the Megan's tier-2 distribution?
A) $7,500
B) $6,250
C) $15,000
D) $22,500
B) $6,250
40,000 - 15,000 tier-1 distribution = $25,000. (7,500/30,000) × 25,000 = 6,250.
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