[yankeetown]

Hey guys,

So i am going to take my last part tomorrow REG and found something i was confused about while doing my final review.

For income distribution deduction, i am supposed to take the lower of the DNI or the actual amount distributed. In becker, it says the DNI is actually DNI (less tax-exempt) income. So my question is: do i use the DNI amount or DNI (less tax-exempt income) amount. So let’s say these were the numbers:

Gross Income – 100,000

Deductions – 60,000

Tax-exempt income – 10,000

Amount distributed to beneficiaries – 45,000.

In this case, the DNI is 50,000 (100k-60k+10k), but DNI (less tax-exempt income) is 40,000.

Would the Income distribution deduction be 40,000 or 45,000?

Would appreciate a quick response. Thanks

[Anonymous]

Hi,

I don't remember offhand but did come Googling and came up with this resource from AICPA

https://www.aicpa.org/InterestAreas/Tax/Resources/TrustEstateandGift/Trusts/DownloadableDocuments/IncomeTaxTrustEstates.pdf

Around page 108-5/6/7 etc. it discusses the rules, and in particular it says on p. 108-7 that DNI is:

Begin with Trust Taxable Income and:

+ Add back the Personal Exemption.

+ Add back capital losses if added to corpus.

+ Add back net tax-exempt income that is allocated to income for FAI purposes.

– Reduce taxable stock dividends and extraordinary cash dividends allocated to

corpus.

– Reduce capital gains allocated to corpus.

= IRC Sec. 643 DNI

So I think, according to this, that DNI = 50,000 and your answer would be 45,000. But I could be totally reading/understanding this wrong…

[Author]

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