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 $

$7$

$0$

$5$

$,$

$0$

$0$

$0$

Long

$-$

term capital gains, allocable to corpus

$2$

$1$

$1$

$,$

$5$

$0$

$0$

Legal and accounting fees, allocable to corpus

$3$

$5$

$,$

$2$

$5$

$0$

Question Content Area

a

$.$

$$ How much income is each beneficiary entitled to receive?

$fill in the blank d

$8$

$6$

$6$

$3$

$1$

f

$9$

$3$

fbffe

$8$

$\_$

$1$

$3$

$5$

$2$

$,$

$5$

$0$

$0$

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A critical value that is used in computing the amount of the entity's distribution deduction is distributable net income

$($

DNI

$)$

$.$

$$As it is defined in Subchapter J

$,$

$$DNI serves several functions.

Question Content Area

b

$.$

$$ What is the trust's DNI?

$fill in the blank

$8$

$3$

$1$

$5$

$5$

$2$

feaf

$8$

$0$

fa

$3$

$\_$

$1$

$6$

$6$

$9$

$,$

$7$

$5$

$0$

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Correct

Question Content Area

c

$.$

$$ What is the trust's taxable income?

$fill in the blank

$8$

$9$

$1$

$1$

$6$

ffd

$7$

fc

$6$

ffe

$\_$

$1$

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Incorrect

Question Content Area

d

$.$

$$ How much gross income is reported by each of the beneficiaries?

$fill in the blank

$4$

a

$8$

$4$

$6$

$0$

f

$5$

$1$

fd

$1$

$0$

$3$

$3$

$\_$

$1$

$3$

$3$

$4$

$,$

$8$

$7$

$5$

Let's break down the calculations step by step.

a$.$ Income Entitlement for Each Beneficiary

The ordinary income of the trust is $$705,000.$ Since Lucy and Ethel are entitled to equal shares, each beneficiary receives: