A simple trust has a distributable net income (DNI) of $50,000 and net accounting income of $60,000, all from taxable sources. The trust has a sole beneficiary, Marty. The trust reports on a calendar tax year and distributes the $60,000 of 2016's net accounting income to Marty on January 20, 2017. No other distributions are made in the current year. Marty's taxable income from the trust this year is

Question

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Since the trust is a simple trust and has only one beneficiary, all of the net income is required to be distributed to the beneficiary for the year in order to avoid being taxed at the trust level.

The trust distributed $60,000 to Marty in January 2017, which is before the end of the trust's tax year. Therefore, the amount of the distribution is included in Marty’s taxable income for 2016.

The trust’s DNI is $50,000, which is the amount of income that is taxable to the beneficiary. Therefore, Marty’s taxable income from the trust this year is $50,000.

Option C) $50,000 is the correct answer.

A Simple Trust Has a Distributable Net Income (DNI) of $50,000