Yellow Trust must distribute 33% of its income annually to Patrick. In addition, the trustee in its discretion may distribute additional income to Minna or Patrick. In the current year, the trust has net accounting income and distributable net income of $150,000, none from tax-exempt sources. The trust makes a $50,000 mandatory distribution to Patrick and a discretionary distribution of $20,000 each to Patrick and Minna. What amounts of income do Patrick and Minna report?

Question

Quizplus · Accepted Answer

Patrick's mandatory distribution of $50,000 is included in his taxable income. 
His discretionary distribution of $20,000 is also included. 
Therefore, Patrick reports $70,000 of taxable income.

Minna's discretionary distribution of $20,000 is also included in her taxable income. 
Therefore, Minna reports $20,000 of taxable income.

Yellow Trust Must Distribute 33% of Its Income Annually to Patrick