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

Question

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Sally must recognize the total amount distributed to her, which is $30,000 (mandatory distribution) plus $25,000 (discretionary distribution), totaling $55,000. However, since the total distributable net income is $100,000 and both Roger and Sally receive equal amounts, Sally's recognized income is limited to $50,000.

The Doyle Trust Reports Distributable Net Income for the Year