Distributable net income
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Definition
The ceiling on a trust’s distribution deduction and on the amount taxable to beneficiaries, preserving the character of underlying income.
Distributable net income in plain English
A trust distributes $50,000 but wonders how much the beneficiary must pick up and what character travels with it. Distributable net income is the ceiling on the trust's distribution deduction and on the amount taxable to beneficiaries, while preserving the character of underlying income. Distributions above DNI generally do not create more beneficiary taxable income. On fiduciary-tax stems, compute DNI before you allocate tax between trust and beneficiary.
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