To reduce trustee commissions,the Emily Trust is operated as though it were two trusts (i.e.,with 70-year-old Grandma and 7-year old Skippy each holding equal shares).This year the trust generated distributable net income (DNI)of $80,000.The trustee distributed $90,000 to Grandma this year: $40,000 as her one-half share of the entity's income,and $50,000 as a distribution of principal.How much of the year's distributable net income is assigned to Grandma?

Question

Quizplus · Accepted Answer

The trust is operated as though it were two trusts, with each holding equal shares. Therefore, Grandma's share of the DNI is 50% or $40,000. The additional $50,000 was a distribution of principal, not DNI, and therefore is not included in the calculation of Grandma's share of the DNI.

To Reduce Trustee Commissions,the Emily Trust Is Operated as Though