The Suarez Trust generated distributable net income (DNI) this year of $150,000, one-third of which was portfolio income, and the balance of which was exempt interest.Under the terms of the trust, Clara Suarez is to receive an annual income distribution of $30,000.At the discretion of the trustee, additional distributions can be made to Clara or to Clark Suarez III.This year, the trustee's distributions to Clara totaled $90,000.Clark also received $90,000.How much of the trust's DNI is assigned to Clara?

Question

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The total DNI of the Suarez Trust was $150,000. Since one-third of that was portfolio income, the portfolio income portion of DNI was $50,000 ($150,000 x 1/3). The remaining $100,000 ($150,000 - $50,000) was exempt interest.

Clara was entitled to receive an annual income distribution of $30,000, and the trustee made distributions totaling $90,000 to her. Therefore, Clara was allocated $30,000 of DNI.

Clark received $90,000, which means that the remaining $60,000 of DNI was allocated to him. However, since the trustee only distributed $90,000 to Clark and Clara combined, Clark must have elected to have the remaining $30,000 of his allocation retained by the trust.

Therefore, the total DNI allocated to Clara was $30,000, which was the amount of her distribution from the trust. The additional $60,000 allocated to her was retained by the trust or distributed to Clark. Thus, the trust's DNI assigned to Clara was $30,000.

The Suarez Trust Generated Distributable Net Income (DNI) This Year