The Eagleton Trust generated distributable net income (DNI)this year of $120,000,one-third of which was portfolio income,and the balance of which was exempt interest.Under the terms of the trust,Clara Eagleton is to receive an annual income distribution of $40,000.At the discretion of the trustee,additional distributions can be made to Clara,or to Clark Eagleton III.This year,the trustee's distributions to Clara totaled $60,000.Clark also received $60,000.How much of the trust's DNI is assigned to Clark?

Question

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The trust generated $120,000 of DNI, of which one-third (or $40,000) was portfolio income and two-thirds (or $80,000) was exempt interest. Clara Eagleton receives an annual distribution of $40,000, so that amount is assigned to her. The remaining $20,000 of the trustee's distributions to Clara ($60,000 - $40,000) can be assigned to either Clara or Clark at the trustee's discretion. Since Clark also received $60,000, that means the remaining $20,000 was assigned to Clark. Therefore, Clark's total distribution from the trust is $40,000 (assigned to him) + $20,000 (from Clara's remaining distribution) = $60,000, which is all of the remaining DNI after Clara's distribution.

The Eagleton Trust Generated Distributable Net Income (DNI)this Year of $120,000,one-Third