Determination of Accounting Income and Distribution. The Trotter Trust has the receipts and expenditures listed below for the current year. Assume the Uniform Act (1962) governs an item's classification as principal or income. The trustee's fee is charged one-half to principal and one-half to income. What is the trust's net accounting income and the maximum amount it can distribute? Assume the trust cannot pay out principal.
Dividends $15,000
Interest on tax-exempt bonds 7,000
Loss on sale of capital asset (9,000)
Rental income from land 6,000
Property taxes on rental property 1,000
Trustee's fee 1,800
C:14-39 Determination of Taxable Income. Refer to Problem C:14-38. Assume the trustee must pay out all of its income currently to its beneficiary, Julio.
a. What is the deductible portion of the trustee's fee?
b. What is the trust's taxable income exclusive of the distribution deduction?
c. What is the trust's DNI?
d. What is the trust's taxable income using the formula approach?