What is Distributable net income (DNI)?
In short
Distributable net income (DNI) is a measure of a trust's or estate's income for the year that caps both the distribution deduction the trust or estate can take and the amount beneficiaries must include in their income.
Key takeaways
- It keeps income from being taxed twice: once to the trust and again to the beneficiaries.
- Distributions carry out income with the same character, such as tax-exempt interest, to beneficiaries.
- Capital gains are usually excluded from it and taxed to the trust.
Where it's tested
REG: Trusts, Estates & Gift Tax Basics — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
What is the primary function of distributable net income (DNI) in fiduciary income taxation?