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24. LO.2, 3 The Allwardt Trust is a simple trust that correctly uses the calendar year for tax purposes. Its income beneficiaries (Lucy and Ethel) are entitled to the trust’s annual accounting income in shares of one-half each.

For the current tax year, Allwardt reports the following.

Ordinary income $100,000

Long-term capital gains, allocable to corpus 30,000

Trustee commission expense, allocable to corpus 5,000

Use the format of Figure 28.3 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 gross income is reported by each of the beneficiaries?

25. LO.2, 3 Assume the same facts as in Problem 24, except that the trust instrument allocates the capital gain to income.

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 gross income is reported by each of the beneficiaries?

29. LO.2, 3 The trustee of the Pieper Trust can distribute any amount of accounting income and corpus to the trust’s beneficiaries, Lydia and Kent. This year, the trust’s records reflect the following:

Taxable interest income $40,000

Tax-exempt interest income 20,000

Long-term capital gains—allocable to corpus 80,000

Fiduciary’s fees—allocable to corpus 9,000

The trustee distributed $26,000 to Lydia and $13,000 to Kent.

a. What is Pieper’s trust accounting income?

b. What is Pieper’s DNI?

c. What is Pieper’s taxable income?

d. What amounts are taxed to each of the beneficiaries?


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