The Zhao Estate generated distributable net income (DNI) this year of $100,000, one-fourth of which was tax-exempt interest, and the balance of which was long-term capital gain. Kyle Zhao, the sole income beneficiary of the estate, received a distribution of the entire $125,000 accounting income of the entity. How does Kyle report the distribution?
a. $75,000 long-term capital gain, $25,000 exempt interest.
b. $50,000 long-term capital gain, $50,000 exempt interest.
c. $75,000 long-term capital gain, $25,000 ordinary income.
d. $93,750 long-term capital gain, $31,250 exempt interest.
a
RATIONALE: The make-up of DNI carries through to the distribution amounts.
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