The Doyle Trust Reports Distributable Net Income for the Year

question 143

Multiple Choice

The Doyle Trust reports distributable net income for the year of $100,000 and no income from tax-exempt sources. Under the terms of the trust instrument, the trustee must distribute $30,000 to Roger and $30,000 to Sally. After payment of these amounts, the trustee is empowered to make additional distributions at its discretion. Exercising this authority, the trustee distributes an additional $25,000 to Roger and $25,000 to Sally. How much income from the trust must Sally recognize?

• A) $25,000.
• B) $30,000.
• C) $50,000.
• D) $55,000.

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Definitions:

Discount Rate

This is the discount rate used in the process of discounted cash flow analysis to find out the current value of cash flows expected in the future.

Annual Cost Savings

The reduction in costs achieved during a fiscal year, often as a result of process improvements or cost-cutting measures.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows, used in capital budgeting to assess the profitability of an investment or project.

Present Investment

Present investment refers to the current amount of money allocated for particular assets or projects, focusing on capital allocation and potential returns.