Question

Lyon, a cash basis taxpayer, died on January 15 of the current year. During the current year, the estate executor made the required periodic distribution of $9,000 from estate income to Lyon's sole heir. The following information pertains to the estate's income and disbursements for the year. For the current calendar year, what was the estate's distributable net income (DNI)?

Estate Income:
$20,000 Taxable interest
$10,000 Net long-term capital gains allocable to corpus
Estate Disbursements:
$5,000 Administrative expenses attributable to taxable income

For the current taxable calendar year, what was the estate's distributable net income (DNI)?
a. $15,000
b. $25,000
c. $30,000
d. $20,000

Answer 1

Lyon's Estate

For the current taxable calendar year, the estate's distributable net income (DNI) is:

a. $15,000

Step-by-step explanation:

a) Estate's Income and Disbursements for the year:

Taxable interest = $20,000

Net long-term capital gains allocable to corpus = $10,000

Administrative expenses attributable to taxable income = $5,000

Therefore, DNI = $20,000 + $5,000 - $10,000 = $15,000

b) Lyon estate's distributable net income (DNI) is the income allocated to the beneficiaries of the trust created by Lyon before his death. The DNI is calculated with the trust's taxable income minus the capital gain or add the capital loss, and then adding the exemptions. The distributable net income is the maximum taxable amount received by a unitholder or a beneficiary.