For the year, the Brighton Trust has distributable net income of $100,000 and no income from tax-exempt sources. Under the terms of the trust instrument, the trustee is required to distribute $25,000 to Roger and $50,000 to Sally. After payment of these amounts, the trustee can make additional distributions at its discretion. Exercising this authority, the Brighton trustee distributes an additional $20,000 to Roger, and $30,000 to Sally. How much income from the trust must Sally recognize?

Question

Quizplus · Accepted Answer

Sally must recognize $65,000 of income from the trust. This is calculated by adding the mandatory distribution of $50,000 to the discretionary distribution of $15,000 (which is her proportional share of the discretionary distribution based on the total discretionary distribution of $50,000 [$20,000 to Roger + $30,000 to Sally] and the total distributable net income of $100,000).

For the Year, the Brighton Trust Has Distributable Net Income