"Your description is lacking details, and a bit askew. What does "open" mean?"
Open the envelope delivering the dividend check.
"What does "trust fund baby" mean."
Someone who's parents gave them the means to their current income.
"Who doesn't "OWE" federal taxes?"
The person opening $50,000 in dividends from Johnson & Johnson.
"See this is where you use words for effect, but don't describe the whole situation."
See this is where your ignorance doesn't serve you well.
"In the case of simple trust, the beneficiary pays an "income tax" on the distributed amount rather than the trust."
"If the income is part of a change in the principal or part of the estate's distributable income, then income tax is paid by the trust and not passed on to the beneficiary."
I'm not referring to actual Trusts. Money distributed by trusts can be either ROI, or taxable income.
"You see everything is taxed, and if one just lived off the income of a trust, the government is still collecting taxes.
Not the federal government; and not on income, on spending.
"The question is whether the "trust fund baby" receives $100K and pays taxes on it, or $75,000 and pays no taxes."
The kid getting $50,000 in dividends from Abbott Labs pays NO federal taxes of any kind. Income taxes BEGIN above that.
"So in the case of what I think you are attempting to describe, the "trust fund baby" would pay taxes on any income derived from the income of the $50K."
No, he wouldn't. If you don't understand how the tax code works, you probably shouldn't opine.
"In the end the government gets its pound of flesh for every dollar given to the benficiary"
False on many levels. You're ignoring gift limits, the standard deduction, GRATs, and inheriting on a stepped-up basis.
"Well the beneficiary does pay taxes "
Not to the feds, unless it's on spending, like a federal gas tax.
"the solution is to treat every form of income the same."
The folks you vote for are 110% against that.
"the beneficiary still pays income taxes on it. I know this because this is my situation."
Then you have other income over and above the $50,000 in dividends.
"Given Danforths explanation, and lack of taxation of a trust, its clear he doesn't understand the point of the Trust."
Oh, FFS, shut up if you don't actually know what you're talking about. The stupid, it burns.