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The Twist Trust has generated $60,000 in depreciation deductions for the year. Its accounting income is...

The Twist Trust has generated $60,000 in depreciation deductions for the year. Its accounting income is $75,000. In computing this amount, pursuant to the trust document, depreciation was allocated to corpus. Accounting income was distributed at the trustee's discretion: $25,000 to Hernandez and $50,000 to Jackson. Compute the depreciation deductions that Hernandez, Jackson, and Twist may claim under the following assumptions. If an amount is zero, enter "0". Do not round any division. Depreciation Deductions Hernandez Jackson Twist Trust

a. Depreciation deduction allocated to corpus. Hernandez$_____ Jackson$_____ Twist Trust$_____

b. If depreciation was allocated to income. Hernandez$_____ Jackson$_____ Twist Trust$_____

c. If the trustee distributed $15,000 each to Hernandez and to Jackson and retained the remaining accounting income. Hernandez$_____ Jackson$_____ Twist Trust$_____

d. If Twist is an estate (not a trust) and depreciation deduction allocated to corpus.

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Answer #1

THE TOTAL AMOUNT OF DEPRECATION FOR THE YEAR IS $60000 I.E. TO BE ALLOCATED UNDER WHEREAS CIRCUMSTANCES.

For a trust, the depreciation deduction is apportioned between the income beneficiaries and the trust on the basis of the trust income allocable to each of the above mentioned.

a. Deprecation is allocated to corpus.

As the allocation is to be done to the corpus and the corpus belong to trust therefore the full amount of deprecation $60000 will be allocated to Twist Trust.

HERNANDEZ $0, JAKSON $0 AND TWIST TRUST $60,000

b. Deprecation allocated to Income

Income Distributed

Name Amount($) PERCENTAGE
HERNANDEZ 25000 33%
JAKSON 50000 67%
TWIST TRUST 0 0%
TOTAL 75000 100%

Therefore,

Deprecation Allocation

DEPRECATION($) 60000
HERNANDEZ 60000*33% 20000
JAKSON 60000*67% 40000
TWIST TRUST 60000*0% 0
TOTAL 60000

HERNANDEZ $20000, JAKSON $40000 AND TWIST TRUST $0

c. Income Distributed

Name Amount($) PERCENTAGE
HERNANDEZ 15000 20%
JAKSON 15000 20%
TWIST TRUST 45000 60%
TOTAL 75000 100%

Deprecation Allocation

DEPRECATION($) 60000
HERNANDEZ 60000*20% 12000
JAKSON 60000*20% 12000
TWIST TRUST 60000*60% 36000
TOTAL 60000

HERNANDEZ $12000, JAKSON $12000 AND TWIST TRUST $36000

d. If TWIST IS AN ESTATE AND NOT A TRUST THEN DEPRECATION ALLOCATION IS SAME AS IN (A) ABOVE.

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