A trust has net accounting income of $30,000, but distributable net income (DNI) of only $25,000 because certain expenses are charged to principal. The trust is required to distribute $10,000 to Alice and it makes a discretionary distribution of $20,000 to Ben. The trust has no tax- exempt income. The amount that Ben reports as gross income is

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Since DNI is only $25,000, the trust can only distribute up to $25,000 tax-free. The required distribution of $10,000 to Alice is covered by DNI, leaving $15,000 of DNI available for discretionary distributions. Therefore, of the $20,000 distributed to Ben, only $15,000 is tax-free and the remaining $5,000 is considered excess distribution and will be taxed as ordinary income to Ben. Therefore, Ben reports $15,000 as gross income.

A Trust Has Net Accounting Income of $30,000, but Distributable