Question Content Area

This year, the Zhao Estate generated distributable net income $($DNI$)$ of $$100,000,$ one$-$fourth of which was tax$-$exempt interest, and the balance of which was long$-$term capital gain. Kyle Zhao, the sole income beneficiary of the estate, received a distribution of the entire $$125,000$ accounting income of the entity. How does Kyle report the distribution?

a$.$ $$50,000$ long$-$term capital gain, $$50,000$ exempt interest.

b$.$ $$75,000$ long$-$term capital gain, $$25,000$ ordinary income.

c$.$ $$93,750$ long$-$term capital gain, $$31,250$ exempt interest.

d$.$ $$75,000$ long$-$term capital gain, $$25,000$ exempt interest.