RECOMMENDED!!Taxable income to Smith, Jones, Smith and Earl Litt

  

Taxable income to Smith, Jones, Smith and Earl Litt1. What three functions does distributable net income serve in fiduciary taxation?2. What problem does the separate share rule alleviate?3. Beneficiaries of estates and complex trusts are subject to the tier system of taxation.Explain what is meant by a first- and second- tier beneficiary.4. The trust instrument requires the trustee to distribute
$40,000 annually to Carl Smith, the grantor’s son. Any residual income may be
distributed or accumulated for Bob Jones, Sam Smith, Earl Litt, and Carl Smith
in the trustee’s discretion. In the current year, the trust has distributable
net income of $100,080 in domestic dividends. The trustee distributes $40,000
of income to Carl Smith. Next, he distributes $30,000 to Bob Jones, $20,000
each to Sam Smith and Earl Litt, and an additional $15,000 to Carl Smith. The
trust does not have any undistributed net income from previous years.Required:How much of the distributions are taxable income to Carl
Smith, Bob Jones,
Sam Smith, and Earl Litt?