Question

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 ?

b. However, if the trust agreement allocates one-half of the fiduciary's fees as well as all of the capital gains and losses to income, the trust accounting income is ?

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Answer #1

a. Accounting income is computed below:

Taxable interest 12,000.00

Rental income 30,000.00

Long term capital gain 0.00

Long term capital loss 0.00

Fees 0.00

Less: depreciation -2,800.00

Trust accounting income 39,200.00

b. One half of fiducary's fee = 6500 divided by 2 = 3250. This amount will be allocated to accounting income of the trust.

Taxable interest 12,000.00

Rental income 30,000.00

Long term capital gain 4,000.00

Long term capital loss -1,100.00

Fees -3,250.00

Depreciation -2,800.00

Trust accounting income 38,850.00

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