25 May Question 1. TheGomezTrustis requiredtodistribute$80,000 annually,splitequally bet
Question
1. TheGomezTrustis requiredtodistribute$80,000 annually,splitequally betweenitstwoincome beneficiaries,LaraandByron.Iftrustincomeisnotsufficient topaytheseamounts,thetrusteecan invadecorpustotheextentnecessary.Duringthecurrentyear,thetrusthasDNIof$60,000.Byronreceivesanadditional$30,000discretionarycorpus distribution.
a. Howmuch ofthe $40,000distributed toLara isincluded inher grossincome?
b. Howmuch ofthe$70,000 distributedtoByron isincludedin hisgrossincome?
c. Howmuchofthesedistributions arefirst-tierdistributionsorsecond-tier distributions?
2. The Willa estate reports $100,000 DNI, composed of $50,000 dividends, $20,000 taxable interest, $10,000 passive income, and $20,000 taxexempt 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 |
3. ThetrusteeoftheMiguelTrustcandistributeanyamountofaccountingincomeand corpustothetrust’sincome
beneficiaries, Paulaand George.This year,the trustincurred thefollowing.
| Taxable interestincome | $40,000 |
| Tax-exemptinterest income | 20,000 |
| Longtermcapitalgains—allocabletocorpus | 10,000 |
| Fiduciary’sfees—allocabletocorpus | 6,000 |
| Thetrusteedistributed$40,000 toPaulaand$40,000toGeorge. |
a. WhatisMiguel’strustaccountingincome?
b. Whatis Miguel’sDNI?
c. WhatisMiguel’s taxableincome?
d. Howmuch grossincome isrecognized byeach ofthe beneficiaries?
4. The Yan Estate is your client, as are many of the decedent’s family members. Determine the tax effects of the indicated losses for the Yan Estate for both tax years. The estate holds a variety of investment assets, which it received from the decedent, Mrs. Yan. The estate’s sole income and remainder beneficiary is Yan, Jr.
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