This article will analyse whether an asset revaluation reserve distribution made by a trustee of a discretionary trust could be regarded as ordinary income for the receiving beneficiary. This is important as normally only the capital gains tax treatment is considered, with the resultant conclusion that such a distribution is not assessable. Through this article's analysis, the accepted position that asset revaluation reserve distribution has no adverse income tax consequences for a beneficiary of a discretionary trust will be challenged. In particular, it will be submitted that the receipt of such a distribution by a discretionary beneficiary could be assessable as ordinary income. The article will initially consider whether an asset revaluation is ordinary income for the trust estate itself. Then the conduit theory's application to asset revaluation reserve distributions by trustees of discretionary trusts will be considered. Following this analysis, the article will consider whether the receipt of an asset revaluation reserve distribution is ordinary income for the beneficiary of a discretionary trust.