Question

distributable net income (DNI) for the Sampson estate is $20,000, including $3,000 of tax-exempt interest income. If the executor distributes $8,000 to the beneficiaries in a year other than the final year, what amount may be taken as a distribution deduction?

Answer 1

Answer:

$8,000

Explanation:

Income distribution deductions apply only to an estate or trust's distributable net income (DNI). In this context, the beneficiaries of an estate or a trust are taxed directly based on the money distributed to them. That means that the estate or trust can deduct distributions when calculating taxes. This is done to avoid double taxation, since the beneficiaries are taxed, then the estate or trust is not.