T is a trust that provides that 30% of its gross accounting income is first to be
Question:
T is a trust that provides that 30% of its gross accounting income is first to be paid to designated charities and then 30% of its net accounting income is next to be paid to A, and the remainder may be accumulated or distributed between C and D. The trust instrument provides that one-half of the depreciation is to be charged against income, that is, the trustee is to establish a reserve equal to one-half of the allowable depreciation deduction, and the remaining one-half allocated according to accounting income. T experiences the following results for the current year:
• Rents $ 100,000
• Dividends $ 30,000
• Tax Exempt Interest $ 20,000
• Capital Gains $ 50,000
• Capital Losses $ 5,000
• Rental Expenses $ 40,000
• Trustee's Commissions $ 15,000
• Depreciation $ 20,000
Assume that of the remainder of the income (after distributions to A and charities), 60% is divided equally between C and D and 40% is accumulated. Compute trust accounting income, tentative taxable income, DNI, the distribution deductions, and the character and amount of the beneficiaries' inclusion.
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill