Distribution of assets in satisfaction of a Specific Bequest carries DNI to the recipient.

• A. True
• B. False
• C. Neither
• D. Both

Answer: (B)

Distributable Net Income (DNI) is the amount of income from a trust or estate that can be distributed to beneficiaries and taxed to them. It applies to distributions of income, not to distributions of principal (corpus).

When a specific bequest is satisfied, the estate or trust typically transfers a particular asset or assets from the corpus to the named beneficiary. That kind of distribution comes from principal, not from the current income of the trust or estate. Since DNI concerns distributions of income, a transfer of assets to satisfy a specific bequest does not generate DNI for the recipient.

If the trust or estate does distribute actual income (for example, cash or other income produced by the trust assets) to a beneficiary, that distribution would carry DNI up to the beneficiary’s share of the trust's or estate's distributable income. But satisfying a specific bequest with principal is not a DNI distribution.