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

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Yellow Trust has a distributable net income (DNI) of $150,000 and is required to distribute 33% of it, or $49,500, to Patrick. The trust has made a $50,000 mandatory distribution to Patrick, so he has received more than his required distribution.

The trust also made a discretionary distribution of $20,000 each to Patrick and Minna. Since the trust has already distributed more than the required amount to Patrick, the remaining discretionary distribution of $20,000 goes to Minna.

Therefore, Patrick reports $50,000 in income ($49,500 mandatory distribution plus $500 excess distribution) and Minna reports $20,000 in income.

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