A Simple Trust has $10,000 of interest income and $20,000 of capital gains allocable to corpus in Year 1. The trust instrument requires all income to be distributed currently. What is the Trust's Distributable Net Income (DNI)?

Answer options:

$30,000

$10,000

$20,000

How to approach this question

DNI Calculation: Taxable Income +/- Adjustments. Capital gains allocated to corpus are subtracted from Taxable Income to arrive at DNI.

Full Answer

B.$10,000✓ Correct

IRC §643(a)(3). Capital gains are excluded from DNI if they are allocated to corpus and not paid, credited, or required to be distributed to a beneficiary. DNI = $10,000 (Interest).

Common mistakes

Including capital gains in DNI.

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