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  3. 3. the kemper trust is required to distribute $30,

3. The Kemper Trust is required to distribute $30,000 annually to each of its two income beneficiaries,...

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3.The Kemper Trust is required to distribute $30,000 annually to eachof its two income beneficiaries, Kim and Karen. If the trust incomeis insufficient to pay these amounts, invade corpus to the extentnecessary. The trustee also has the discretion to pay out aamounts, either from income for from corpus.For the currentyear the trust has taxable interest income . of $160,000 andDNI of $160,000. The trust distributes $30,000 to Kim and $150,000to Karen.
a. What is DNI after the required distribution?
b. What amount of the $30,000 is taxable to Kim?
c. What amount of the $150,000 is taxable to Karen?

Answer & Explanation Solved by verified expert
4.1 Ratings (707 Votes)

What amount of the $150,000 is taxable to Karen?

After the first tier distributions ($60000/2 = $30000 to each income beneficiaries) are accounted for, $100000 DNI remains to be assigned to the beneficiaries on the second tier ($160000 DNI - $60000 DNI used for first tier distribution).

                           Amount Received                 DNI Received =Gross Income ,Portfolio Income

First Tier             $30000                                   $30000

Second Tier       $120000                                 $120000

Total                  $150000                                 $150000

What amount of the $30,000 is taxable to Kim?

                     Amount Received                     DNI received =Gross Income,Portfolio income

First Tier         $30000                                    $30000

Second Tier      0                                               0

Total               $30000                                     $30000

What is DNI after the required distribution?

The DNI after the required distribution is ($160000-$60000)= $100000

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