The LMN Trust Is a Simple Trust That Correctly Uses

question 70

Essay

The LMN Trust is a simple trust that correctly uses the calendar year for tax purposes.Its income beneficiaries (Kathie,Lynn,Mark,and Norelle)are entitled to the trust's annual accounting income in shares of one-fourth each.For the current calendar year,the trust has ordinary income of $80,000,a long-term capital gain of $20,000 (allocable to corpus),and a trustee commission expense of $4,000 (allocable to corpus).Use the format of Figure 19-3 to address the following items.
a.How much income is each beneficiary entitled to receive?
b.What is the trust's DNI?
c.What is the trust's taxable income?
d.How much is taxed to each of the beneficiaries?

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Definitions:

Gain Or Loss

The financial result that occurs when the selling price of an asset differs from its purchase price.

Initial Cost

The initial expense of acquiring an asset, including purchase price, setup, and preparation costs.

Accumulated Depreciation

The total amount of a tangible asset's cost that has been allocated to depreciation expense since the asset was put into use.

Gain Or Loss

The financial result that occurs when the selling price of an asset differs from its purchase price, either positive (gain) or negative (loss).