ExpertMedium1 markMultiple Choice
CPA · Question 41 · Area II: Entity Tax Compliance
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)?
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:
A.
$30,000
B.
$10,000
C.
$0
D.
$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
B
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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