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 2018's net accounting income to Marty on January 20, 2019. No other distributions are made in the current year. Marty's taxable income from the trust this year is
A)$0.
B)$49,700.
C)$50,000.
D)$60,000.

Question

Quizplus · Accepted Answer

Marty's taxable income from the trust this year is $50,000, which is the amount of the Distributable Net Income (DNI). The DNI sets the upper limit on the amount that can be taxed to the beneficiary. Even though the distribution was more than the DNI, Marty is taxed only on the DNI amount of $50,000.

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