25 May Question 1. TheSuarez Trustgenerated distributablenetincome (DNI)thisyear of
Question
1. TheSuarez Trustgenerated distributablenetincome (DNI)thisyear of$150,000,two-thirds ofwhich wasportfolioincome,and thebalance ofwhichwas exemptinterest. Undertheterms ofthe trust,Clara Suarezis toreceive anannualincome distributionof $30,000.At thediscretion ofthe trustee,additional distributionscan bemade toClaraorto ClarkSuarezIII. Thisyear,the trustee’sdistributions toClara totaled$60,000.Clark received$90,000. Howmuchof thetrust’s DNIisassigned toClara?
a.$75,000.
b.$60,000.
c.$45,000.
d.$30,000.
2. TheSuarez Trustgenerated distributablenetincome (DNI)thisyear of$150,000,two-thirds ofwhich wasportfolioincome,and thebalance ofwhichwas exemptinterest. Undertheterms ofthe trust,Clara Suarezis toreceive anannualincome distributionof $30,000.At thediscretion ofthe trustee,additional distributionscan bemade toClara,orto ClarkSuarezIII. Thisyear,the trustee’sdistributions toClara totaled$60,000.Clark received$90,000. Howmuchof thetrust’s DNIis assignedtoClark?
a. $0,onlyfirst-tier distributionsare subjectto Federalincome tax.
b. b.$60,000.
c. $75,000.
d.$90,000.
3. Toreducetrusteecommissions, theSigridTrust isoperatedas thoughitwere twotrusts(i.e.,with 70-year-oldGrandmaand7-year oldSkippy eachholdingequal shares).This yearthe trustgenerateddistributable netincome(DNI)of$80,000. TheSigridtrustee distributed$100,000to Grandmathis year:$40,000as herone-halfshare oftheentity’sincome, and$60,000as adistributionofprincipal.Skippyreceivednodistribution.Howmuchoftheyear’sdistributablenetincomeisassignedtoGrandma?
a.$40,000.
b.$50,000.
c.$80,000.
d.$100,000.
4. TheWillis Trustinstrumentprovides thatTamara,the soleincomebeneficiary, isto receive$40,000 annually.Iftrustaccounting incomeis notsufficientto paythis amount,theWillis trusteeisempowered toinvade corpustotheextentnecessary.Duringthecurrentyear,the trustreportsdistributablenetincome(DNI) of$100,000,including $30,000ofnettax-exemptinterest.Inaccordancewiththetrustinstrument,$40,000ispaidtoTamara.Whatis
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