Taxable Income (TI) - - PowerPoint PPT Presentation

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Taxable Income (TI) - - PowerPoint PPT Presentation

Sep 26, 2023 288 likes •379 views

Three Concepts of Income Back to Basics:

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SLIDE 1

Back to Basics: Analyzing the Differences Between Fiduciary Accounting Income (“FAI”) and Distributable Net Income (“DNI”)

  • May 13, 2017

ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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Income Taxation of Non-Grantor Trusts

  • May 13, 2017

ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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Three Concepts of Income

  • May 13, 2017

ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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Taxable Income (“TI”)

  • i.e
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SLIDE 2

May 13, 2017 ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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Taxable Income (“TI”)

  • May 13, 2017

ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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Fiduciary Accounting Income (“FAI”)

  • May 13, 2017

ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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Distributable Net Income (“DNI”)

  • May 13, 2017

ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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How Do We Calculate DNI?

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SLIDE 3

May 13, 2017 ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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When will FAI and DNI Diverge?

  • E.g.
  • E.g
  • May 13, 2017

ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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When will FAI and DNI Diverge?

  • May 13, 2017

ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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(1) Includable in TI/DNI but not FAI

  • May 13, 2017

ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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When will FAI and DNI Diverge?

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SLIDE 4

May 13, 2017 ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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(2) Deductible from TI/DNI but not FAI

  • (2) Deductible from TI/DNI but not FAI

May 13, 2017 ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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  • May 13, 2017

ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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What is Distributable Net Income?

  • May 13, 2017

ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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Distributable Net Income—DNI

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SLIDE 5

May 13, 2017 ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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How Do We Calculate DNI?

  • May 13, 2017

ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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Calculation of DNI- 643(a)-v. 1.0

  • May 13, 2017

ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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Calculation of DNI- 643(a)-v. 1.0

  • May 13, 2017

ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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Calculation of DNI- 643(a)-v. 2.0

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SLIDE 6

May 13, 2017 ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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Adjusting ATI to Get to DNI

  • May 13, 2017

ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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Adjusting ATI to Get to DNI

  • i.e.
  • May 13, 2017

ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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Adjusting ATI to Get to DNI

(for simple trusts only)

  • in good faith
  • May 13, 2017

ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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Adjusting ATI to Get to DNI

  • i.e.
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SLIDE 7

May 13, 2017 ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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Adjusting ATI to Get to DNI

  • Reconciling TI, FAI and DNI
  • May 13, 2017

ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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May 13, 2017 ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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FAI: Income vs. Principal

  • May 13, 2017

ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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FAI: Income vs. Principal

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SLIDE 8

May 13, 2017 ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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FAI: State Principal and Income Acts

  • May 13, 2017

ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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FAI: State PIAs—Receipts

  • May 13, 2017

ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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FIA: State PIAs—Disbursements

  • May 13, 2017

ABA Section of Taxation - May 2017 Meeting Back to Basics: Analyzing Differences Between FAI & DNI

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FAI: “Reasonable and Equitable”?