ExpertMedium1 markMultiple Choice
CPA · Question 41 · Area II: Entity Tax Compliance
A trust has the following items in Year 1:<br/>- Interest Income: $10,000<br/>- Dividends: $5,000<br/>- Long-Term Capital Gain (allocable to corpus): $8,000<br/>- Trustee Fees (allocable to income): $2,000<br/>What is the Distributable Net Income (DNI)?
A trust has the following items in Year 1:<br/>- Interest Income: $10,000<br/>- Dividends: $5,000<br/>- Long-Term Capital Gain (allocable to corpus): $8,000<br/>- Trustee Fees (allocable to income): $2,000<br/>What is the Distributable Net Income (DNI)?
Answer options:
A.
$21,000
B.
$13,000
C.
$15,000
D.
$23,000
How to approach this question
DNI Calculation: Income ($10k + $5k) - Expenses ($2k). Capital Gains allocable to corpus are EXCLUDED from DNI. Result: $13,000.
Full Answer
B.$13,000✓ Correct
B
IRC §643(a). DNI = Taxable Income modified. Capital gains allocated to corpus are subtracted. DNI = Interest ($10k) + Dividends ($5k) - Fees ($2k) = $13,000.
Common mistakes
Including capital gains in DNI when they are allocated to corpus.
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