Using Exhibit 20.4 as a guide, describe the computation of a fiduciary entity’s accounting income, taxable income, and distributable net income.

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Step 1 Determine the accounting Income of the entity Step 2 Compute entity taxable Income before the distribution deduction Step 3 Determine distributable net income (DNI) and the distribution deduction Step 4 Compute entity taxable income (step 2 less the deduction determined in step 3) Step 5 Allocate DNI and its character to the beneficiarles. Use the tier system, if necessary.