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Dianne Mehany and Alison Egan Discuss Allocating Distributable Net Income on Strafford Webinar

October 8, 2019
Speaker:Dianne C. Mehany
Program:Allocation of Trust Distributable Net Income Between Trust and Multistate Beneficiaries
Event Sponsor:Strafford Publications
Registration:Click Here To Register

This CLE webinar will provide trust and estates counsel a thorough and practical guide into the challenges of allocating distributable net income (DNI) for complex trusts with income or beneficiaries in multiple states. The panel will discuss key tax rule challenges and considerations in trust document drafting, tax reporting of trust income from assets such as partnership interests, capital gains, and tax-exempt interest, and detail state variations in the tax treatment of various income components.


The tax concept of DNI is one of the more complicated tasks in trust planning and both fiduciary and tax accounting. DNI determines the maximum income distribution deduction that a trust or estate may claim and the amount that beneficiaries must report as taxable income. These calculations become even more complicated when a trust has income or beneficiaries in multiple states, with fiduciaries needing to grasp the various state rules and approaches to computing DNI.

Two factors that make determining DNI complex are the presence of tax-exempt income or a trust situation that allows DNI to include capital gains. Also, scenarios where actual distributions are either higher than or less than actual DNI impacts tax reporting for trusts and beneficiaries.

The majority of states impose an income tax on resident trusts and state-sourced income and deduction of nonresident trusts. As with virtually all multistate taxation issues, the variety of conflicting state laws creates huge tax compliance issues. Depending on the allocation of income, a trust may have DNI sourced to one state that exceeds its federal amount.

Listen as our experienced panel provides a practical guide to specific challenges of multistate allocation of DNI from complex trusts.


The panel will review these and other relevant topics:

  • Determining whether a trust is resident or nonresident for state income tax purposes
  • Allocating income and deductions for FAI purposes
  • When trust income allocated to an individual state exceeds federal DNI
  • Notable state variations and deviations from the federal tax treatment of grantor trusts
  • Key practice methods to avoid allocation and distribution pitfalls

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