Question

The ThalenTrust has the receipts and expenditures listed below for the current year. Assume the Uniform Act governs an​ item's classification as principal or income. The​ trustee's fee is charged​ one-half to principal and​ one-half to income.

Requirement

What is the​ trust's net accounting income and the maximum amount it can​ distribute? Assume the trust instrument precludes distributing principal currently.

Dividends	$12,000
Interest on tax-exempt bonds	9,000
Loss on sale of capital asset	(11,000)
Rental income from land	4,000
Property taxes on rental property	2,200
Trustee's fee	1,200

Answer 1

Trust has the following receipts and expenditure
Particulars	income	principal
Dividends	$12000
interest on tax- exempt bonds	$9000
Loss on sale of capital assets		($11000)
rental income from land	$4000
property taxes on rental property		$2200
Trustee fees	($1200)	1200
determine the trusts net acounting income and the amount it can distribute to
beneficiaries
thus the net accounting income is [$12000+$9000+$4000-$1200]. = $23800
the amount a trust can distribute is the DNI In order to find the DNI first calculate
the trust's taxable income exclusive of the destruction deduction
particulars	amount debit / credit
Dividends	$12000
rental income	$4000
Capital loss on sale of capital assets	($11000)
minus: property taxes on rental property	($2200)
deductible portion of trustee's fees	($1200)
personal exemption	($300)
taxable income , exclusive of distribution deduction	$1300
Calculate DNI by making the adjustment to taxable income exclusive of the
distribution deduction
particulars	amount debit / credit
taxable income , exclusive of distribution deduction	$ 1300
plus : personal exemption	$300
plus: capital loss on sale of capital assets	$11000
plus: tax exempt interest	$9000
DNI	$21600
THUS THE DISTRIBUTABLE INCOME THAT THE TRUST CAN MAKE TO BENEFICIARIES IS $ 21600