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QUESTION

1. Gary Grantor created an irrevocable trust to benefit his favorite charity (Wholesomeandgood) along with other beneficiaries. The trust must distribute 25 percent of its net income to Wholesomeandgo

1. Gary Grantor created an irrevocable trust to benefit his favorite charity (Wholesomeandgood) along with other beneficiaries. The trust must distribute 25 percent of its net income to Wholesomeandgood each year and the remainder is either payable to Gary’s children in shares or accumulated at the sole discretion of trustee, ABC Bank and Trust Company. The trust had the following items of income and expense for the tax year and made no distributions to Gary’s children: 

• Rental Income………………….$100,000 

• Expenses (from rental)………$20,000 

• Tax-exempt interest………….$40,000 

Determine the amount of the charitable contribution, the federal income tax charitable deduction, and the taxable income for the trust for the tax year. 

2. Susan Settlor created an irrevocable trust with sprinkle powers in the hands of her independent trustee. Susan and her husband are not beneficiaries and hold no powers that would cause the trust to be treated as a grantor trust under IRC Secs. 671-679. The trust had the following income and expense items for the tax year. 

• Ordinary interest income………………..$100,000 

• Long-term capital gain……………………$40,000 

• Tax-exempt interest income……………$50,000 

• Fiduciary Income Fee…………………….$4,000 

• Fiduciary Principal Fee……………………$2,000 

Determine the amount of the trust’s FAI, TTI, and DNI.

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