Question

The Stoudemire Trust reports $45,000 of net investment income (NII) and $60,000 in net profits from an active business operation for 2018. Stoudemire retains all of the business profits but, under the terms of the trust agreement, distributes $17,400 cash from the NII to its sole beneficiary Marshall.

Answer 1

• Net Investment Income is Income received from the assets such as bonds,stocks, mutual funds, loans and other investments.
• It may include capital gains, interests or dividends.
• It is taxable in the hands of receiver and also the trust, if the qualify the requirements.
• Tax rate is 3.8% surtax on modified gross income over certain limit.
• It does not include wages, unemployment compensation, self employment income , social security benefits.
• And NII distribution should be made based on the holdings of the individual not merely by the agreements..