Reference no: EM133419407

Question 1- The Betts Trust has two beneficiaries: Marcus and Lynn. Pursuant to the trust instrument, the trustee split the trust into two equal shares, one for Marcus and one for Lynn. Marcus and Lynn are entitled to discretionary distributions only from their share of the trust. For the current year, Marcus' share of the trust earns $10,000 of qualified dividends and $30,000 of taxable interest, while Lynn's share of the trust earns $12,000 of qualified dividends and $18,000 of taxable interest. During the taxable year, the trustee makes a discretionary distribution of $25,000 to Marcus and $40,000 to Lynn.

(1) What is the amount of distributable net income (DNI) of the trust,

(2) how much DNI is reportable by each beneficiary, what is the distribution deduction allowed to the trust and

(4) how much, if any, income is taxable to the trust?

Question 2- . Trust has DNI and trust accounting income of $50,000 and distributes the entire amount to

A, who is required under the trust instrument to receive all income annually (i.e., A is a first tier beneficiary). Trust makes a $40,000 charitable contribution. How much does A report as income?

(b) Facts are the same as above except that the mandatory distribution to A is only $20,000, and the trustee makes $25,000 of distributions to other beneficiaries (second tier beneficiaries)