Distributable Net Income: Mastering Difficult DNI Calculations for Estates and Complex Trusts

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Course Details

Course Information

smart_display Format
On-Demand
signal_cellular_alt Difficulty Level
Intermediate
work Practice Area
Tax Preparer

Date & Time

event Date
Monday, July 15, 2024
schedule Time
1:00 p.m. ET./10:00 a.m. PT
timer Program Length
110 minutes

Credit Information

BARBRI is a NASBA CPE sponsor and this 110-minute webinar is accredited for 2.0 CPE credits.
BARBRI is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).

$197.00

This course will provide tax advisers and professionals with a deep dive into calculating distributable net income (DNI) for complex trusts. The panel will delineate between trust accounting income and taxable income and focus on tax reporting of trust income from assets, such as partnership interests, capital gains, and tax-exempt interest. The speakers will demonstrate DNI calculations and discuss tax planning scenarios in a case study format.

Faculty

Jeremiah W. Doyle

Senior Vice President

Bank of New York Mellon, Corp

Mr. Doyle provides clients with integrated wealth management advice on how to hold, manage and transfer their wealth in a tax efficient manner. He is the editor and co-author of Preparing Fiduciary Income Tax Returns, a contributing author of Preparing Estate Tax Returns and Understanding and Using Trusts and a contributing author of Drafting Irrevocable Trusts in Massachusetts. He is a lecturer in law in the Graduate Tax Program at Boston University School of Law.

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Jacqueline Patterson

Partner

Buchanan & Patterson, LLP

Ms. Patterson specializes in tax, estate and financial transactions, with an emphasis on asset protection and succession planning. She advises grantors, fiduciaries and beneficiaries in matters involving the transfer, administration, investment and management of assets and is a consultant to attorneys and CPAs in fiduciary accounting, taxation and litigation. She has held Adjunct Faculty positions in the graduate tax programs at both USC and Golden Gate University.

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Description

Calculation of trust accounting income and the tax concept of DNI is one of the more complicated tasks in both fiduciary and tax accounting. DNI determines the maximum income distribution deduction that a trust or estate may claim and the amount that beneficiaries must report as taxable income. Section 643 and its regulations govern the calculations required for DNI. Tax advisers must be proficient in handling complex DNI computations.

Two factors that make DNI calculations so vexing are the presence of tax-exempt income or a trust situation that allows DNI to include capital gains. Also, scenarios where actual distributions are either higher than or less than actual DNI affect tax reporting and final computing of trust AGI.

Accurate calculation and management of DNI provide advisers with planning opportunities to minimize tax. The "65-day rule," detailed in IRC 663(b), allows current tax year treatment by fiduciaries of distributions made within 65 days after the trust or estate's year-end. These distributions apply to the entity's income distribution deduction and can result in significant overall tax savings. Advisers must know how the 643(e) election affects DNI and how specific bequests under Section 663(a)(1) do not carry out DNI.

Listen as our experienced panel provides a detailed roadmap on the proper calculation of DNI under various income and distribution scenarios and offers best practices for tax minimization planning around DNI computations and leveraging distribution rules.

Outline

Trust accounting income vs. DNI
Calculation of DNI under various income scenarios
Allocation of DNI among beneficiaries
"Tier I" vs. "Tier II" distribution requirements
Planning opportunities and the 65-day rule
Section 643(e) election and impact on DNI
Specific bequests under Section 663(a)(1)

Benefits

The panel will discuss these and other critical issues:

Treatment of tax-exempt income in DNI calculation
Calculation of income distributed deduction
Reporting capital gains if includable in DNI
Planning opportunities and the 65-day rule

NASBA Details

Learning Objectives

After completing this course, you will be able to:

Discern the correct use of DNI for a complex trust
Recognize the treatment of capital gains under IRC 643(b)
Determine tax planning opportunities available under the 65-day rule
Identify nondeductible expenses under IRC 265
Ascertain the income taxation for estates and trusts in various scenarios
Distinguish the distribution system differences between simple and complex trusts

Field of Study: Taxes
Level of Knowledge: Intermediate
Advance Preparation: None
Teaching Method: Seminar/Lecture
Delivery Method: Group-Internet (via computer)
Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
Prerequisite: Three years+ business or public firm experience at mid-level within the organization, involved in complex estate planning, tax forms and schedules; Supervising other preparers/accountants. Specific knowledge and understanding of tax reporting of trust income for various types of assets held in trust; familiarity with calculating distributable net income and the "65-day rule" of IRC 663(b).

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.