A standard discretionary trust has a capital loss of $20,000. In addition it has ordinary net income of $5000. My understanding is that there must be at least $1 of net taxable income to be able to ditribute to the beneficiaries. In this case the capital loss is quaranteened (and carried forward) in the trust and is therefore not included in taxable income. So does this mean that the ordinary income can be distributed to the beneficiaries even though there is an overall accounting loss? How is this accounted for in the trust financial accounts?