In a simple trust that earned 27,000 in dividends and paid 4,000 in trustee fees (2,000 from income and 2,000 from principal), trust accounting income is which amount?

In a simple trust that earned 27,000 in dividends and paid 4,000 in trustee fees (2,000 from income and 2,000 from principal), trust accounting income is which amount?

• A. $0
• B. $23,000
• C. $25,000
• D. $27,000

Answer: (C)

Trust accounting income is the amount available from current income after expenses charged against that income. In a simple trust, only the portion of trustee fees that is charged to income reduces accounting income; fees charged against principal do not. Here, the trust earned 27,000 in dividends. Trustee fees total 4,000, with 2,000 charged against income and 2,000 charged against principal. Subtract the 2,000 charged to income from the 27,000 to get 25,000. The portion charged to principal does not affect accounting income. Thus, trust accounting income is 25,000.

Trust accounting income is the amount available from current income after expenses charged against that income. In a simple trust, only the portion of trustee fees that is charged to income reduces accounting income; fees charged against principal do not.

Here, the trust earned 27,000 in dividends. Trustee fees total 4,000, with 2,000 charged against income and 2,000 charged against principal. Subtract the 2,000 charged to income from the 27,000 to get 25,000. The portion charged to principal does not affect accounting income.

Thus, trust accounting income is 25,000.