Question

A simple trust has ordinary income of $56,000, a long-term capital gain of $20,000 (allocable to corpus), and a trustee commission expense of $5,500 (payable from corpus). The two income beneficiaries, Woo and Jae, are entitled to the trust's annual accounting income, based on shares of 60% and 40%, respectively. Woo is allocated DNI of $________ and Jae is allocated DNI of $._________

Answer 1

Answer:

Woo is allocated DNI of $30,300 and Jae is allocated DNI of $20,200

Explanation:

Item                                Totals     Accounting     Taxable   Distributable N.I.

                                                        Income           Income    /Deductions

Ordinary income       56,000      56,000           56,000

Net long-term capital   20,000                             20,000

gain

Fiduciary fees              -5,500                               -5,500

Personal exemption                                               -300

Accounting Income/ Taxable        56,000           70,200      70,200

Income before the Distributions

Deduction

Exemption                                                                                   300

Corpus Capital Gain/Loss                                                         -20,000

Distributable Net Income                                                          50,500

Distribution Deduction                                            50,500

Entity Taxable Income                                              19,700

Distributable Net Income

Woo allocated DNI = 50,500 * 60% = $30,300    

Jae allocated DNI = 50,500 * 40% = $20,200