Problem 28-24 (Algorithmic) (LO. 2, 3)

The Allwardt Trust is a simple trust that correctly uses the calendar year for tax purposes. Its income beneficiaries (Lucy and Ethel) are entitled to the trust's annual accounting income in shares of one-half each.

For the current tax year, Allwardt reports the following.

Ordinary income $720,000

Long-term capital gains, allocable to corpus 216,000

Legal and accounting fees, allocable to corpus 36,000

a. How much income is each beneficiary entitled to receive? $fill in the blank _______________

A critical value that is used in computing the amount of the entity's distribution deduction is distributable net income (DNI). As it is defined in Subchapter J, DNI serves several functions.

b. What is the trust's DNI? $fill in the blank ________________

c. What is the trust's taxable income? $fill in the blank ____________

d. How much gross income is reported by each of the beneficiaries? $fill in the blank _____________