24211_ch25_final_p001-008

25 13 through 25 16 and 643a b dividends rents ltcg

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Unformatted text preview: 5,000 Less: Deductible trustee fee Rent expense Deduction for distribution to beneficiaries Exemption (complex trust) Trust taxable income (4,000) (7,500) (22,800)* (100) $20,600 *$30;000 distributions (See Example 16 and p. 25-16.) c. Beneficiary C: Beneficiary D: (See Example 16 and p. 25-17.) $28,500 taxable DNI $37,500 DNI $20,000 distribution $10,000 distribution $28,500 taxable DNI $15,200 taxable income $37,500 DNI $28,500 taxable DNI $7,600 taxable income $37,500 DNI 25-6 Chapter 25 Income Taxation of Estates and Trusts 25-27 a. b. Because total current distributions of $70,000 are less than DNI, each beneficiary is required to report the amount of the distribution representing taxable DNI in his or her gross income. Therefore, E must report $60,000 of taxable DNI and G must report $10,000 of taxable DNI. The trust's deduction for distribution to beneficiaries is $70,000. (See Example 15, p. 25-17.) The required first-tier distribution to E is $42,500, 50 percent of the trust accounting income of $85,000. The additional $37,500 distributed to E and the $40,000 distributed to G are discretionary second-tier distributions. The first $42,500 of DNI is allocated to the first-tier distribution. The remaining $42,500 of DNI is allocated proportionately to the second-tier distributions as follows: $37,500 E's second-tier distribution $42,500 $20,565 $77,500 total second-tier distributions $40,500 G's second-tier distribution $42,500 $21,935 $77,500 total second-tier distributions Therefore, E must report taxable DNI of $63,065 ($42,500 $20,565), and G must report taxable DNI of $21,935. The trust's deduction for distributions to beneficiaries is $85,000. [See Examples 15, 16 and 17, p. 25-18, and 662(a)(1) and (2).] 25-28 Beneficiary S: First-tier distribution of $60,000 is taxable to the extent of $75,000 taxable DNI $60,000 $45,000 $100,000 DNI Beneficiary T and U: Second-tier distributions are taxable to the extent of remaining taxable DNI: DNI First-tier distribution Remaining DNI $100,000 (60,000) $ 40,000 75% $30,000 Taxable DNI allocable to second-tier distributions T: $40,000 distribution $30; 000 $17,143 taxable to beneficiary T $70,000 total second-tier distributions U: $30,000 distribution $30,000 $12,857 taxable to beneficiary U $70,000 total second-tier distributions [See Example 17, p. 25-18, and 662(a).] 25-29 The beneficiaries pay tax on taxable DNI of $33,000. The balance represents previously taxed income...
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This note was uploaded on 02/05/2012 for the course ACCT 110 taught by Professor Smith during the Spring '11 term at Adrian College.

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