Testamentary trust established by T.P. provides that 50% of its income to be paid to T.P.'s wife.The trustee than has the discretion to accumulate or distribute the balance of the income to T.P.'s son or to Shady University. When the wife dies, the corpus and any accumulated income are to be distributed to T.P.'s daughter. The trust instrument does not provide for a reserve for depreciation. During 2021, the testamentary trust had the following items of income and expenses: Income: Rents $40,000 Taxable Interest $28,000 Tax-Exempt Interest $12,000 Long-Term capital Gain $20,000 Expenses: Depreciation on Rental $6,000 Operating Expenses - Rental $14,200 Trustee-Commission (Corpus) $1,000 Trustee-Commission (Income) $2,000 Distributions: Wife 50% Son 25% Shady University 25%

Step 1: TLI Rents Taxable Interest Tax-Exempt Long Term CG $- Gross TLI $- Less: Rental Expenses TLI Tax Dep Less: Tax Depreciation $- Son 25% $0 $1,500 Less: Trustee Comm Shady U 25% $0 $1,500 Net TLI $- Spouse 50% $0 $3,000 (Sch B. LN 8) Total $0 $6,000 Since no reserve allocated Step 2: Gross Income directly to beneficiary

Taxable Interest LN 1 Long Term CG LN 2 Schedule E - Rental Rental Inc LN 5 Rental Exp LN 5 Gross Income $- LN 9

STEP 3: TTI

Gross Income $- Less: Fiduciary Fees LN 12 Adjust T/E 12/80 x $3,000 #DIV/0! LN 12 Less: Charitable Contributions $- SCH A LN 1&2 25% x NET TLI $63,800 Adjust T/E: 12/80 x 15,590 #DIV/0! SCH A LN 1&2 TTI #DIV/0!

STEP 4: DNI TTI #DIV/0! Tax Exempt as Adjusted Tax Exempt $12,000 SCH B, LN 1 Adjust T/E Fiduciary Fees #DIV/0! SCH B, LN 1 Adjust T/E Charitable #DIV/0! SCH B, LN 1 Less: LTCG $(20,000) SCH B, LN 3 DNI #DIV/0! SCH B, LN 7 Character of the DNI #DIV/0! #DIV/0! #DIV/0! Total Rents Tax Interest Tax Exempt Gross TLI $- $40,000 $28,000 $12,000 Rent Expenses $(14,200) $(14,200) Tax Depreciation $- No Reserve Trustee Fee $(3,000) #DIV/0! #DIV/0! Charitable $- #DIV/0! #DIV/0! #DIV/0! $(17,200) #DIV/0! #DIV/0! #DIV/0!

Step 5: Distribution Deduction a. 1). Amount of TLI required to $- To W be distributed 2). Plus: Other amounts properly paid $- to Son Potential DD $- Ltd to DNI #DIV/0! SCH B, LN 7 b. the Character of $47,850 is based upon the allocation table in Step 4 DD Taxable Inc T/E Income #DIV/0! #DIV/0! #DIV/0! SCH B, LN 13 c. Potential DD #DIV/0! SCH B, LN 7 Less: Portion attributable to T/E income #DIV/0! SCH B, LN 12 DD #DIV/0! SCH B, LN 15