This podcast is made by Ran Chen, who holds an EA license, Insurance and Securities licenses (Series 6, 63, 65), and the CFP® designation. He is passionate about opening access to high-quality exam preparation resources and helping learners prepare more effectively for professional certification exams.

In this episode you will learn:

- That Distributable Net Income (DNI) acts as a ceiling for both the trust's distribution deduction and the beneficiary's reportable income.

- Why capital gains allocated to the trust's principal (corpus) are the most common and critical exclusion from the DNI calculation on the EA exam.

- How tax-exempt interest is included in the DNI calculation to ensure its tax-free character is retained when passed through to the beneficiary.

- The function of the Tier System in complex trusts, which prioritizes mandatory (Tier 1) income distributions over discretionary (Tier 2) distributions when allocating DNI.

- A simple mnemonic to avoid the most common exam trap: 'With DNI, you must deny the capital gain.'

For more free exam prep tools, practice questions, and AI-powered explanations, visit https://open-exam-prep.com/ or YouTube Channel: https://www.youtube.com/@Open-exam-prep