Which of the following statements concerning a grantor-retained annuity trust (GRAT) is (are) correct?

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Which of the following statements concerning a grantor-retained annuity trust (GRAT) is (are) correct?

l. The grantor is taxed on trust income during the retained term.

II. The grantor makes an irrevocable transfer to the remainder person(s) when the trust is created.
A . I only
B . II only
C . Both I and lI
D . Neither I nor II

Answer: C