Accounting Income vs Estate Income

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  • #187880
    wjun15
    Member

    During the current year, a trust reports the following information:

    dividents $10,000

    interest from corp bonds $12,000

    tax exempt interest from state bonds – $4,000

    capital gain (allocated to corpus) – $2,000

    trustee fee (allocated to corpus) – $6,000

    What is the trust’s accounting income?

    The answer is $26,000 (dividends 12,000 + interest from corporate bonds $12,000 + tax exempt interest from state bonds $4,000)

    can someone explain this? Why is the tax exempt interest from state bonds included as accounting income? Is accounting income not the same as taxable income? I think I am getting confused on what they mean by accounting income.

    Are there differences between taxable income, estate income, and accounting income? I know the estate income includes capital gain allocated to corpus so this question is def not asking about estate income formula

    Thanks!

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  • #587482
    M.O.D.
    Member

    If you studied FAR, accounting income is GAAP income, which includes interest and realized gains.

    BA Mathematics, UC Berkeley
    Certificates in CPA and EA preparation, College of San Mateo
    CMA I 420, II 470
    FAR 91, AUD Feb 2015 (Gleim self-study)

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