A trust is required to distribute 10% of its income to Eleanor. In addition, the trustee in his discretion may distribute income to Eleanor and/or Marshall. The trust has net accounting income of $50,000, none of which is tax- exempt. The trust distributes the $5,000 mandatory payment to Eleanor and also distributes discretionary amounts of $5,000 to Eleanor and $5,000 to Marshall. How much must Eleanor include in income?

Question

Quizplus · Accepted Answer

Since the mandatory distribution to Eleanor is $5,000, that amount must be included in her income. Additionally, the discretionary amount distributed to Eleanor is $5,000, which must also be included in her income. However, the discretionary amount distributed to Marshall is not relevant to Eleanor's income calculation. Therefore, Eleanor must include a total of $10,000 in income.

A Trust Is Required to Distribute 10% of Its Income