A Trust Has Distributable Net Income (DNI)of $50,000, Including $30,000

question 74

Essay

A trust has distributable net income (DNI)of $50,000, including $30,000 tax-exempt interest income and $20,000 taxable interest income. The trust instrument requires that all income be distributed at least annually, 30% to Jane and 70% to Joe. What is the amount and character of the income that Jane receives?

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Definitions:

Total Costs

The sum of all expenses incurred in the production of goods or services, including direct and indirect costs, both variable and fixed.

Step-Down Method

A method of allocating costs whereby one service department’s cost is allocated to all remaining service departments and operating departments, and so on, until all service department costs are allocated to final products.

Death Spiral

A situation occurring when transfer prices include fixed costs and users reduce their use of the internal product or service. This further increases the transfer price (based on average cost) and more users reduce their demand.