Question - Determination of Accounting Income

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Question 1 - Determination of Accounting Income and Distribution. The Trotter Trust has the receipts and expenditures listed below for the current year. Assume the Uniform Act governs an item's classification as principal or income. The trustee's fee is charged one-half to principal and one-half to income. What is the trust's net accounting income and the maximum amount it can distribute? Assume the trust instrument precludes distributing principal currently.

Dividends $15,000

Interest on tax-exempt bonds 7,000

Loss on sale of capital asset (9,000)

Rental income from land 6,000

Property taxes on rental property 1,000

Trustee's fee 1,800

Question 2 - Determination of Taxable Income. Assume the trustee must pay out all of its income currently to its beneficiary, Julio.

a. What is the deductible portion of the trustee's fee?

b. What is the trust's taxable income exclusive of the distribution deduction?

c. What is the trust's DNI?

d. What is the trust's taxable income using the formula approach of Figure.

Reference no: EM132598666

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