The Ulrich 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 $60,000 to Roger and $60,000 to Sally.After paying these amounts, the trustee is empowered to make additional distributions at its discretion.Exercising this authority, the Ulrich trustee distributes an additional $20,000 to Roger and $20,000 to Sally.How much gross income from the trust must Sally recognize?

Question

Quizplus · Accepted Answer

Since the trust has distributable net income of $100,000 and the trustee distributed $60,000 to both Roger and Sally, there is a total of $20,000 ($100,000 - $60,000 - $60,000) available for additional distributions.

The trustee exercised its discretion and distributed an additional $20,000 to Sally. Therefore, Sally must recognize gross income of $80,000 ($60,000 + $20,000) from the trust.

Roger's additional distribution is not relevant to the calculation of Sally's gross income from the trust.

The Ulrich Trust Has Distributable Net Income for the Year