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safezone safezone
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Posts: 782
5 years ago
The Tucker Trust was established six years ago. The trust is required to distribute all of the trust income at least annually to Betty for life. Capital gains are credited to principal. The current year results of the trust are as follows:

   Amounts Allocable To
   Income   Principal
Dividends   $15,000
Rental income from land   2,500
Tax-exempt interest   7,500
Rental expenses   500
Trustee fees   $600
Tax return preparation fee   250
Capital gain on stock sale (stock purchased five years ago)   24,250   6,000
Distribution of net accounting income   1,300
Payment of estimated taxes

Compute (a) distributable net income (DNI), (b) the distribution deduction, (c) trust taxable income, and (d) Betty's reportable income and its classification. Charge all of the deductible expenses against rent income.
Textbook 

Prentice Hall's Federal Taxation 2014 Corporations, Partnerships, Estates & Trusts


Edition: 27th
Authors:
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That's not philosophy, it's geometry
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strwbrrystrwbrry
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Posts: 541
5 years ago
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More questions for this book are available here
(a)   DNI = $23,650 ($15,000 + $2,500 + $7,500 - $500 - $250 - $600)
(b)   Distribution deduction = $16,330 [$23,650 - $7,320 (net tax-exempt income)]. Note the nondeductible trustee's fee is $180 [($7,500/$25,000) × $600].
(c)   Trust taxable income = $5,700 ($6,000 - $300)
(d)   Betty's dividends = $15,000; Betty's rental income = $1,330 ($2,500 - $500 - $250 - $420 deductible trustee's fees); Betty's tax-exempt interest = $7,320 ($7,500 - $180)
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