The Zhao Estate Generated Distributable Net Income (DNI) This Year

question 67

Multiple Choice

The Zhao Estate generated distributable net income (DNI) this year of $100,000, one-fourth of which was tax- exempt interest, and the balance of which was long-term capital gain. Kyle Zhao, the sole income beneficiary of the estate, received a distribution of the entire $125,000 accounting income of the entity. How does Kyle report the distribution?

• A) $75,000 long-term capital gain, $25,000 exempt interest.
• B) $50,000 long-term capital gain, $50,000 exempt interest.
• C) $75,000 long-term capital gain, $25,000 ordinary income.
• D) $93,750 long-term capital gain, $31,250 exempt interest.

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Definitions:

Gingko Biloba

A herbal supplement derived from the leaves of the Ginkgo biloba tree, used for various medicinal purposes including memory enhancement and circulation improvement.

Ginseng

A plant root often used in herbal medicine, believed to have various health benefits, including boosting energy and immune system function.

Enoxaparin

A medication used as an anticoagulant to prevent and treat blood clots, often administered via injection.

Garlic

A plant known for its strong aroma and flavor, commonly used in cooking, and also for its potential health benefits including antimicrobial and cardiovascular effects.