The Sterling Trust owns a business and generated $100,000 in depreciation deduct

Question

The Sterling Trust owns a business and generated $100,000 in depreciation deductions for the tax year. Mona is one of the income beneficiaries of the entity. Given the following information, can Mona deduct any of the Sterling depreciation on her Form 1040? If so, how much is her deduction?

Sterling’s taxable income from the business $ 800,000

Sterling’s gross income from the business 4,000,000

Mona’s share of trust accounting income 500,000

Total trust accounting income 2,500,000

Mona’s share of distributable net income 1,200,000

Total distributable net income 1,600,000

Explanation / Answer

Mona can deduct depreciation in her Form 1040 in the ratio of accounting income.

Thus, depreciation which Mona can claim = Mona's share of accounting income/Totoal trust's accounting income * depreciation = 500000/2500000 * 100000 = 20000

So Mona can claim $20000 of depreciation as deduction in Form 1040.

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