Enrolled Agent Ready

StudyingPart 1

Switch exam

Special Enrollment Examination

Part 1SEE Part 1: Individuals✓Part 2SEE Part 2: Businesses Part 3SEE Part 3: Representation, Practices and Procedures

Part 2 Trusts and Estates (Form 1041) question: Distributable net income (DNI) serves

Part 2Trusts and Estates (Form 1041)

Distributable net income (DNI) serves to:

A Set the trustee's annual fee under the trust instrument
B Cap the distribution deduction and what beneficiaries include
C Determine the amount of each of the trust's estimated tax payments
D Measure the trust's accounting income under state law

Show the answer and explanation

Answer: B. Cap the distribution deduction and what beneficiaries include

DNI limits the distribution deduction the trust may take and the amount taxable to beneficiaries, and it fixes the character of what they receive (for example tax-exempt interest keeps its character). Fiduciary accounting income under the governing instrument and state law is a different concept. Source: IRC 643(a), 651(b), 661(c); Form 1041 instructions (2025), Schedule B. Tax year: 2025 (law as of 31 Dec 2025).

Common mistake

Confusing DNI with fiduciary accounting income.

Practice more Part 2 Trusts and Estates (Form 1041) questions

Exam-style questions with worked answers, then full timed mocks. Free to start.

Start practicing →

Study note: Trusts and Estates (Form 1041)Part 2practice questions & mock exams

Related Part 2 practice questions

A trust is a simple trust for a tax year if its terms require it to distribute all income currently and it On Form 1041, a decedent's estate is allowed an exemption of A calendar-year corporation formed in 2024 wants S status starting January 1, 2025. March 15, 2025 fell on a Saturday. By what date must it have filed Form 2553 for the election to be timely?

Build a daily practice habit — a few exam-style questions a day, with worked answers. Free to start.

Start practicing →

Original study material mapped to the public IRS SEE content outlines; not a real exam question.Not affiliated with or endorsed by the IRS or PSI. Verify figures and rules against current guidance before relying on them.