D how much is taxed to each of the beneficiaries a

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South-Western Federal Taxation 2020: Comprehensive
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Chapter 28 / Exercise 24
South-Western Federal Taxation 2020: Comprehensive
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d. How much is taxed to each of the beneficiaries?
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South-Western Federal Taxation 2020: Comprehensive
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Chapter 28 / Exercise 24
South-Western Federal Taxation 2020: Comprehensive
Maloney/Raabe/Young
Expert Verified
a. $15,000 (1/4 of $60,000 accounting income). b. $56,000. c. ($300). d. $14,000 (1/4 of $56,000 DNI). Item Totals Accounting Income Taxable Income Distributable Net Income/ Distribution Deduction Ordinary income $40,000 $40,000 $40,000 Net long-term capital gain 20,000 20,000 20,000 Fiduciary fees 4,000 (4,000) Personal exemption (300) Accounting Income/Taxable Income Before the Distributions Deduction $60,000 STEP 1 $55,700 STEP 2 $55,700 Exemption 300 Corpus Capital Gain/Loss Net Exempt Income Distributable Net Income $56,000 Distribution Deduction (56,000)w STEP 3 Entity Taxable Income ($ 300) STEP 4 wLesser of DNI ($56,000) or actual distribution ($60,000). 135. The Gomez Trust is required to distribute $80,000 annually, split equally between its two income beneficiaries, Lara and Byron. If trust income is not sufficient to pay these amounts, the trustee can invade corpus to the extent necessary. During the current year, the trust has DNI of $60,000. Byron receives an additional $30,000 discretionary corpus distribution. a. How much of the $40,000 distributed to Lara is included in her gross income? b. How much of the $70,000 distributed to Byron is included in his gross income? c. How much of these distributions are first-tier or second-tier? a. $30,000, one-half of DNI. b. $30,000.
c. First-tier of $30,000 to both beneficiaries. First-tier distributions are those distributions which are composed of trust accounting income that is required to be distributed currently. There are no second-tier distributions. The tier system only accounts for the annual DNI amounts, and all of the $60,000 DNI is distributed on the first tier. 136. The Willa estate reports $100,000 DNI, composed of $50,000 dividends, $20,000 taxable interest, $10,000 passive income, and $20,000 tax-exempt interest. Willa’s two noncharitable income beneficiaries, Shanna and Tom, receive distributions of $75,000 each. How much of each class of income is deemed to have been distributed to Shanna? To Tom? Use the following template to structure your answer. Beneficiary Amount Received DNI, Income Type Corpus, Non-taxable Dividends Taxable Interest Passive Exempt Interest Shanna Tom Totals in DNI Beneficiary Amount Received DNI, Income Type Corpus, Non-taxable Dividends Taxable Interest Passive Exempt Interest Shanna $75,000 $25,000 $10,000 $5,000 $10,000 $25,000 Tom $75,000 $25,000 $10,000 $5,000 $10,000 $25,000 Totals in DNI $50,000 $20,000 $10,000 $20,000 $50,000 137. The trustee of the Miguel Trust can distribute any amount of accounting income and corpus to the trust’s income beneficiaries, Paula and George. This year, the trust incurred the following. Taxable interest income $40,000 Tax-exempt interest income 20,000 Long-term capital gains—allocable to corpus 10,000 Fiduciary’s fees—allocable to corpus 6,000 The trustee distributed $40,000 to Paula and $40,000 to George. a. What is Miguel’s trust accounting income? b. What is Miguel’s DNI? c. What is Miguel’s taxable income? d. How much gross income is recognized by each of the beneficiaries?
a. $60,000.

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