Fiduciary k-1 Preparation

[billm6]

I am fiduciary for a family trust owning timber land.  I am preparing k-1 for the trust beneficiaries.

Should I show the beneficiary income on line 6 as ordinary income? If this is the only income for the trust, is an attached schedule still needed? 

[Anonymous_]

Is the trust carrying on a trade or business? What is the exact nature of the income?

[billm6]

The trust owns one asset, land with timber.  The timber was cut in 2021 and net proceeds from cutting paid to trust and 100% distributed to beneficiaries.

[Anonymous_ · Accepted solution]

The sale could be considered ordinary income or capital gain.

You might want to peruse the article at the link below.

See https://smallfarms.cornell.edu/2015/07/financial-timber

[Anonymous_]

See also https://ttlc.intuit.com/community/entering-importing/help/where-do-i-enter-income-from-a-timber-sale...

[Mike9241]

we know nothing about the trust and even a family trust can be treated as a grantor trust.  a 1041 would still be required but rather than a K-1 each beneficiary gets a grantor trust letter.

[billm6]

Thanks for the feedback.   Are you referring to the annual Beneficiary letter that the Fiduciary normally prepares? or is this something else?

[Anonymous_]

No. By a grantor letter @Mike9241 is referring to a Grantor Information Statement (aka Grantor Information Letter) that contains all items of income, deduction, gain, credits, etc.

The GIS is issued by grantor trusts whereas K-1s are issued by nongrantor trusts.