DNI stands for what?

• A. Distributable Net Income
• B. Direct Net Income
• C. Disability Net Income
• D. Discretionary Net Income

Answer: (A)

Distributable Net Income is a trust tax term that defines the portion of the trust’s current income that may be distributed to beneficiaries and taxed to them. It’s derived from the trust’s taxable income for the year with specific adjustments and serves as the limit on what can be passed through to beneficiaries for tax purposes. When distributions are within this amount, beneficiaries report the income on their own tax returns, and the trust gets a deduction for those distributions, reducing the trust’s overall tax. Any income not distributed remains subject to tax at the trust level. The other phrases don’t describe this tax-pass-through concept, so they aren’t correct in this context.