R4 - big topic 3/3 - Estate, Trust and Gift Flashcards
1
Q
I. Overview
A
Fiduciaries - trust and estates are separate entities.
Fiduciaries Accounting - Classification of all receipts as either 1. Principal (Corpus) OR 2. Income.
2
Q
II. Income taxation rules for estates and trusts
- DNI
- Income distribution deduction (lessor of actual distribution or DNI)
A
- DNI (distributable Net income)
DNI is a LIMITATION on the amount the rust or estate can deduct to beneficiaries.
CORE FORMULA Estate/Trust Gross Income - (Estate/Trust Deductions) = Adjusted Total Income \+ Additional Tax Exempt Interest - (Capital Gains)** = DNI
Gross income = same as individual income + capital gain
Deductions = **include contribution to charity (in will)
**(Capital Gain) = Gain Attributable to principal/corpus
Income Distribution Deduction = LESSOR of Actual distribution or DNI