The Roz Trust has 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 $40,000 to Roger and $40,000 to Sally. How much income from the trust must Sally recognize?

Question

Quizplus · Accepted Answer

Sally must recognize the $30,000 distribution required by the trust instrument. Additionally, she must recognize $10,000 of the trustee's discretionary distributions since the trustee distributed a total of $50,000 to her. Therefore, Sally must recognize a total of $30,000 + $10,000 = $40,000 of income from the trust.

The Roz Trust Has Distributable Net Income for the Year