4. The trustee of Pace Trust can distribute any amount of accounting income and

Question

4. The trustee of Pace Trust can distribute any amount of accounting income and corpus to the trust beneficiaries, Lynda and Scott. 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) $80,000 Fiduciary's fees (allocable to corpus) $9,000 The trustee distributed $26,000 to Lynda and $13,000 to Scott. a. What is the Pace Trust accounting income? b. What is the trust DNI? c. What is the Pace Trust taxable income? d. What is the distribution deduction? e . What amount of tax will the Trust pay? f. What is the amount and character of income tax to each of the beneficiaries? 4. The trustee of Pace Trust can distribute any amount of accounting income and corpus to the trust beneficiaries, Lynda and Scott. 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) $80,000 Fiduciary's fees (allocable to corpus) $9,000 The trustee distributed $26,000 to Lynda and $13,000 to Scott. a. What is the Pace Trust accounting income? b. What is the trust DNI? c. What is the Pace Trust taxable income? d. What is the distribution deduction? e . What amount of tax will the Trust pay? f. What is the amount and character of income tax to each of the beneficiaries? Taxable interest income $40,000 Tax-Exempt interest income $20,000 Long-term capital gains (allocable to corpus) $80,000 Fiduciary's fees (allocable to corpus) $9,000 The trustee distributed $26,000 to Lynda and $13,000 to Scott. a. What is the Pace Trust accounting income? b. What is the trust DNI? c. What is the Pace Trust taxable income? d. What is the distribution deduction? e . What amount of tax will the Trust pay? f. What is the amount and character of income tax to each of the beneficiaries? a. What is the Pace Trust accounting income? b. What is the trust DNI? c. What is the Pace Trust taxable income? d. What is the distribution deduction? e . What amount of tax will the Trust pay? f. What is the amount and character of income tax to each of the beneficiaries?

Explanation / Answer

ITEM TOTAL ACCOUNTING INCOME TAXABLE INCOME DISTRIBUTABLE NET INCOME Taxable Interest Income $40,000 $40,000 $40,000 Tax exempt interest income 20000 20000 - Net long term capital gain 80000 - 80000 Trustee Expense(fiduciary expense) 9000 - -6000 (40000/60000)*9000 Personal Exemption -100 Accounting Income/Taxable Income before distribution deductions: $60,000 $113,900 $113,900 Exemption 100 Corpus capital gain/loss -80000 Net Exempt Income 17000 20000-[(20000/60000)*9000] Distributable Net income 51000 Distribution Deduction ($26,000) Entity Taxable Income $87,900 ANSWERS a) Pace Trust Accounting Income $60,000 b) Trust DNI $51,000 c) Pace Trust Taxable Income $87,900 d) Distribution Deduction $26,000 f) Amount and character of income tax to each of beneficiaries Beneficiary Amount Received Taxable Interest Exempt Interest Passive Income Lynda $26,000 $20,392 $10,196 $30,588 Scott $13,000 $10,196 $5,098 $15,294 Note: Calculation of Taxable Interest Lynda ($26000/51000DNI)*40000 Scott ($13000/51000DNI)*40000 Note: Calculation of Exempt Interest Lynda ($26000/51000DNI)*20000 Scott ($13000/51000DNI)*20000

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