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 total distribution is $50,000 (mandatory) + $20,000 (discretionary) = $70,000, which is 33% of the total income, so the total income of the trust is $70,000 / 33.33% = $210,000.
Minna's distribution is $20,000 (discretionary), so her total distribution does not affect the calculation of the total income.
Patrick reports $70,000 of income (mandatory and discretionary distributions).
Minna reports $20,000 of income (discretionary distribution).

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