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Accounting Question (Estate Finance Family Tax Planning) 1. In 2012, Larry creates a trust with Ted...

Accounting Question (Estate Finance Family Tax Planning)

1. In 2012, Larry creates a trust with Ted as trustee. Ted (as trustee) may distribute income and principal to Susie, Jeff and Leon to provide for their health, education maintenance and support at his discretion. In 2012, the trust has $15,000 of interest and $15,000 of dividends. Additionally, the trust received $115,000 for the sale of an asset with a basis of $100,000. In 2012, $5000 is distributed to each of Jeff, Susie and Leon (for a total of $15,000 distributions). How much income does each of Jeff, Susie, Leon and the trust report for 2012 and why?

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Answer #1

Income of trust for 2012

Interest income. $15000

Dividend income. $15000

profit on sale of asset . $15000

Total income of Trust $45000

Less Amount distributed $15000 - to Jeff,, Susie and Leon

So net income of Trust . $30,000

Working Note - profit on sale of asset

Sale Value - $ 115000

Less basis . - $100000

so profit . - $15000

Income of Jeff,Susie and Lion - 5000 eeach

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