Distribution K-1 and Allocation of Distribution

[jjreynol]

I am using TurboTax to prepare a 1041 for my sister's complex trust. My deceased mother's trust had investment income (interest, dividends and capital gains) in 2023 that was distributed to the beneficiaries. One of the beneficiaries is my sister's trust. My sister's trust in turn distributed the same income directly to my sister. The K-1 for the income has a certain mix among interest, dividends and capital gains. I want to pass along the same amount and mix of income. I would therefore like TurboTax to generate a distribution K-1 for the same amount of income with same mix of interest, dividends and capital gains. I have been unable to accomplish that. Instead, TurboTax appears to perform the allocation itself once I enter the amount distributed to the beneficiary, my sister. Specifically, for example, the distribution K-1 calculated by TurboTax includes no capital gains even though the income K-1 does include capital gains. I understand there may be a direct dollar allocation method that allows the numbers on the distribution K-1 to be entered directly on the form. How do I make that happen? My goal is to effectively pass through the identical mix of income as a distribution to the beneficiary. Thank you.

[Anonymous_]

In the program, with capital gains to be distributed, you need to allocate the gains to the beneficiary(ies) and to income (see screenshots).

[Anonymous_]

Also note that you, as trustee, need the authority to distribute capital gains to the beneficiary(ies) as, generally, capital gains remain with the trust (and the trust assumes any tax liability as a result of the gains).