Taxation t Answer ax during Year 2 rust trust to The trusteo authorized the rust

Question

Taxation

t Answer ax during Year 2 rust trust to The trusteo authorized the rust aarsement corpus deluld, at discretlon, distribute eny amounit of the B Trust noome or copus during the term of the trust Compute Below's taxable Incom. of the trusl. Compule Belioms ins ablin thcu,nma c Trust, a simple trust, recalvas the foilowing Hems. axable terest aln ed l Ce Fees- allocated to Income a) Compute Cello's accounting Income b) Compute Cello's taxable Income before the distribultlon deductlon. c) Calculate Cello's distributable net income and the distributlon deductlon. computation of Cello's taxable income. d) d) Complele the computaltlan of

Explanation / Answer

Taxable income of Bellow's trust= $ 100000-$10000-$20000=$70000

Dividend income - fiduciary fees - contributions made by the trust

Explanation: as there is no specification regarding the % of amount allocated to trust/ benificiary all the income is considered to be taxable in the hands of trust ( dividend income)

capital gains are expressly said to allocate for benificiaries, so can't be accounted for the taxable income of trust

contributions made by the trust are required to be deducted while compuitng the taxable income of the trust

as the interest income is " tax-free", can't be considered in the taxable income

Fiduciary fees in the general sense means the fees charged by the trustees for their services, and is an expense for trust

* I have opted for reverse approach for computing the taxable income ie instead of computing the taxable income and deducting all, computed taxable income by deducting only eligible expenses

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