The Zhao Estate generated distributable net income (DNI) this year of $100,000, one-fourth of which was tax- exempt interest, and the balance of which was long-term capital gain. Kyle Zhao, the sole income beneficiary of the estate, received a distribution of the entire $125,000 accounting income of the entity. How does Kyle report the distribution?

Question

Quizplus · Accepted Answer

Kyle reports $75,000 as long-term capital gain and $25,000 as exempt interest. The estate's DNI consists of $75,000 long-term capital gain (three-fourths of $100,000) and $25,000 tax-exempt interest (one-fourth of $100,000). The distribution to Kyle is proportionate to these components.

The Zhao Estate Generated Distributable Net Income (DNI) This Year