Question

In computing distributable net income (DNI) for a trust, one removes any net capital gain or...

In computing distributable net income (DNI) for a trust, one removes any net capital gain or loss that is allocable to income.

a. True

b. False

Homework Answers

Answer #1

Answer

TRUE

Explanation:

Distributable net income (DNI) is the income that is used to allocate the income between the truth and the beneficiaries of the trust.

Distributable net income (DNI) for a trust is calculated as follows:

DNI =  Taxable Income - Capital Gains + Capital Losses + Tax Exemptions + Dividends - Fees

So, it is clear that the calculation of DNI requires the removal of any capital gains or losses.

Hence, the statement given in the question is correct.

In case of any doubt or clarification, you're welcome to come back via comments.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Which of the statements below regarding the net capital gain or loss of a trust is...
Which of the statements below regarding the net capital gain or loss of a trust is not correct? A. In the final year of a trust or state, any unused capital loss carryover is passed through to the remainder beneficiaries and keeps its original character. B. Net capital gain is typically allocated to corpus, although it can be allocated to income if permitted by the trust instrument or local law.
5. A simple trust has ordinary gross income of $20,000 and $10,000 of capital gains, which...
5. A simple trust has ordinary gross income of $20,000 and $10,000 of capital gains, which are allocable to corpus. Its only deductible item is a trustee's commission of $5,000, allocable to corpus under the trust instrument. a. How much is the trust's accounting income? b. How much is the DNI that will be taxable to the beneficiary? c. How much will the trust pay tax on?
Justice is a simple trust that correctly uses the calendar year for tax purposes. Its income...
Justice is a simple trust that correctly uses the calendar year for tax purposes. Its income beneficiaries (Oliver, Bart, Arthur, and Victor) are entitled to the trust’s annual accounting income in shares of one-fourth each. For the current calendar year, the trust incurs ordinary business income of $40,000, a long-term capital gain of $20,000 (allocable to income), and a trustee commission expense of $4,000 (allocable to corpus). How much income is each beneficiary entitled to receive? What is the trust’s...
The Allwardt Trust is a simple trust that correctly uses the calendar year for tax purposes....
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 $100,000 Long-term capital gains, allocable to corpus 30,000 Trustee commission expense, allocable to corpus 5,000 a. How much income is each beneficiary entitled to receive? b. What is the trust's DNI? c. What is...
Trust Y provides that all of its income must be distributed currently to A. In addition,...
Trust Y provides that all of its income must be distributed currently to A. In addition, the trustee is empowered to make discretionary distributions of principal to J and K. For each of the following situations, determine the taxable income of the trust and the amount of trust income, if any, taxable to trust beneficiaries. a) For the taxable year, Trust Y has tentative taxable income (“TTI”) and distributable net income (“DNI”) of $100,000 comprising $70,000 of taxable interest income...
Individual taxpayers prefer capital gain income and ordinary losses because capital gains are taxed at lower...
Individual taxpayers prefer capital gain income and ordinary losses because capital gains are taxed at lower tax rates and ordinary losses are not limited to net $3,000 per year like net capital losses are. True False
In the current year, Alan reported a $105,025 net §1231 gain and a $4,000 net capital...
In the current year, Alan reported a $105,025 net §1231 gain and a $4,000 net capital loss. Assuming Alan reported $59,500 of nonrecaptured §1231 losses during the prior 5 years, what amount of Alan's net §1231 gain for the current year, if any, is treated as ordinary income? None of the choices are correct. $0. $59,500. $105,025. $45,525.
The Taffy Trust is a simple trust. Sean is its sole beneficiary. In the current year,...
The Taffy Trust is a simple trust. Sean is its sole beneficiary. In the current year, the trust earns $12,000 in taxable interest and $30,000 in rental income. In addition, the trust recognizes a $4,000 long-term capital gain and $1,100 long-term capital loss. The trustee assesses a fee of $6,500 for the year. Depreciation related to the rental property is $2,800. a. If the trust agreement allocates fees, depreciation, and capital gains and losses to corpus, trust accounting income is...
Part A Which of the following would be included in net income? A. An unrealized gain...
Part A Which of the following would be included in net income? A. An unrealized gain on an available for sale debt investmenet as of the end of the accounting period. B. An unrealized gain as a result of a a foreign currency translation adjustment C. An unrealized loss on an avaiable for sale debt investment as of the end of the accounting period D. A gain from the disposal of equipment that occurred on the last day of the...
The Polozzi Trust projects that it will incur the following items in the next year, which...
The Polozzi Trust projects that it will incur the following items in the next year, which will be its first year of existence. Interest income $25,000 Rent income 100,000 Cost recovery deductions for the rental activity $35,000 Capital gain income 40,000 Fiduciary and tax preparation fees 7,000 Betty, the grantor of the trust, is working with you on the language in the trust instrument relative to the derivation of annual accounting income for the entity. She will name Shirley as...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT