The Allwardt Trust is a simple trust that correctly uses the calendar year for t

Question

The Allwardt Trust is a simple trust that correctly uses the calendar year for tax purposes. Its income beneficiaries (Lucy and Ethel) are entitled to the trust's annual accounting income in shares of one-half each.

For the current tax year, Allwardt reports the following.

The trust instrument allocates the capital gain to income.

a. Each beneficiary is entitled to receive income of $65000

b. The trust's DNI is $125,000

c. The trust's loss is $_____

d. Each of the beneficiaries can report $______ of gross income.

Ordinary income $100,000 Long-term capital gains 30,000 Trustee commission expense, allocable to corpus 5,000

Explanation / Answer

Simple Trust Calculation of total income of Simple Trust: $ Ordinary Income 100000 Long Term Capital gain 30000 TrusteeCommission Exp allocable to Corpus -5000 Trust's Distributable Net Income 125000 Lucy & Ethel each will get following amounts : Distributed Income From Trust (125000/2) 62500 Commission Income From Trust (5000/2) 2500 Total Income to be reported by each beneficiary 65000

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