Harry, the sole income beneficiary, received a $40,000 distribution from the Lucy Trust, in a year when the trust's distributable net income was $30,000. Harry's AGI can increase by as much as $40,000.

Question

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Harry's AGI can only increase by the amount of the trust's distributable net income (DNI), which is $30,000, not the full distribution amount.

Harry, the Sole Income Beneficiary, Received a $40,000 Distribution from the Lucy