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

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

Step-by-step 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