1. **Stating the problem:** We need to determine the income and capital treatment of the trust assets for the year ended 31 December 2024, given net rentals, expenses, and payments for the maintenance and education of the minor son. 2. **Understanding the trust terms:** - Income is to be applied for the maintenance and education of the minor son. - Trust capital and accumulated income are payable to the son at age 25. - Alternative heirs are provided if the son does not survive to 25. 3. **Given data:** - Net rentals earned: $750,000 (after charging $300,000 for structural alterations). - Payments for maintenance and education: $65,000 and $80,000 (total $145,000). 4. **Important rules:** - Structural alterations ($300,000) are capital expenses and should be deducted from income to calculate net income. - Net rentals of $750,000 are after charging these capital expenses, so $750,000 is net income. - Payments for maintenance and education ($145,000) are income applied. 5. **Calculations:** - Total income earned = $750,000 - Income applied for maintenance and education = $65,000 + $80,000 = $145,000 - Remaining income = $750,000 - $145,000 = $605,000 (retained income) 6. **Interpretation:** - $145,000 of income was used for the son's maintenance and education. - $605,000 remains as accumulated income in the trust capital. - Structural alterations ($300,000) are capital expenses and reduce capital, not income. **Final answer:** The trust earned net income of $750,000 after capital expenses. $145,000 was applied for the son's maintenance and education. $605,000 remains accumulated in the trust capital.