Mackenzie is the grantor of a trust over which Mackenzie has retained a discretionary power to receive income. Kelly, Mackenzie's child, receives all taxable income from the trust unless Mackenzie exercises the discretionary power. To whom is the income earned by the trust taxable?
A. To the trust to the extent it remains in the trust.
B. To Mackenzie because he has retained a discretionary power.
C. To Kelly as the beneficiary of the trust.
D. To Kelly and Mackenzie in proportion to the distributions paid to them from the trust.
Answer: B. To Mackenzie because he has retained a discretionary power.
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