Question

The Gomez Trust is required to distribute $80,000 annually, split equally between its two income beneficiaries, Lara and Byron. If trust income is not sufficient to pay these amounts, the trustee can invade corpus to the extent necessary. During the current year, the trust has DNI of $60,000. Byron receives an additional $30,000 discretionary corpus distribution.
a. How much of the $40,000 distributed to Lara is included in her gross income?

b. How much of the $70,000 distributed to Byron is included in his gross income?

c. How much of these distributions are first-tier distributions or second-tier distributions?

Answer 1

Answer:

A.$30,000

B.$30,000

C.First-tier of $30,000 to both beneficiarie

Explanation:

Gomez Trust

a. (1/2×DNI $60,000)

=$30,000

b.$30,000

c.First-tier of $30,000 to both beneficiarie in which First-tier distributions can be said to be those distributions which are often composed of trust accounting income that is required to be distributed currently.

Hence there are no second-tier distributions because the tier system only accounts for the annual DNI amounts, and all of the $60,000 DNI are been distributed on the first tier.