Assume that a simple trust during the current year receives $10,000 of tax-exempt income, $10,000 of portfolio income, and $20,000 of rental income. The trustee incurs rental expenses of $10,000 and $3,000 in trustee fees, of which $2,000 is allocable to trust law income (TLI), and $1,000 is allocable to trust principal. The trust distributes $28,000 to the beneficiary. (All indirect expenses are allocated to portfolio income.)

2. What is the amount of the trusts net fiduciary accounting income?

a. $20,000.

b. $28,000.

c. $30,000.

d. $40,000.

3. What is the amount of DNI?

a. $26,250.

b. $27,000.

c. $27,300.

d. $37,000.

4. What is the amount of the distribution deduction?

a. $17,750.

b. $20,000.

c. $27,750.

d. $28,000.

220207 R2-1 VOGEL.SEM/FTW.22

** REVIEW QUESTIONS ONLY ** REVIEW QUESTIONS ONLY **

5. What is the amount of taxable income?

a. ($2,250).

b. $0.

c. $1,700.

d. $1,950.

e. ($300).

6. What is the amount the beneficiary is potentially required to include in gross income?

a. $0.

b. $17,750.

c. $27,000.

d. $28,000.

7. What is the character of the income to the beneficiary?

a. $0 taxable income.

b. $10,000 taxable portfolio income; $7,750 rental income; and $9,250 tax-exempt income.

c. $10,000 taxable portfolio income; $17,000 rental income; and $10,000 tax-exempt income.

d. $10,000 taxable portfolio income; $18,000 rental income.

e. $7,750 taxable portfolio income; $10,000 rental income; and $9,250 tax-exempt income.