"How do I determine the capital gains attributable to income"
Capital gain usually remains with the trust and the trust pays the applicable income tax, if any, on the gain.
However, some trust instruments mandate that the trustee allocate capital gain to income and distribute same to the beneficiary(ies), some trusts give the trustee discretion to treat capital gain as income and distribute it, some expressly prohibit the trustee from distributing capital gain, and some are completely silent on the issue.
Therefore, you have to refer to the trust instrument, itself, and applicable local law to determine whether or not you can treat capital gain as income and distribute the gain to the beneficiary(ies).
The need for this entry came up during the review process
"How do I determine the capital gains attributable to income"
Capital gain usually remains with the trust and the trust pays the applicable income tax, if any, on the gain.
However, some trust instruments mandate that the trustee allocate capital gain to income and distribute same to the beneficiary(ies), some trusts give the trustee discretion to treat capital gain as income and distribute it, some expressly prohibit the trustee from distributing capital gain, and some are completely silent on the issue.
Therefore, you have to refer to the trust instrument, itself, and applicable local law to determine whether or not you can treat capital gain as income and distribute the gain to the beneficiary(ies).
Ok I'm preparing final 2020 Form 1041 for a trust that terminated in 2020 and this matter came up also. I have read the thread/comments and still not sure what figure I put in the box, or how it affects my return. I (as trustee) sold all assets to liquidate trust and I have $66,152 in capital gains. Paid out $275,000 each to 2 beneficiaries so all such money has been distributed. Do I put $66,152 in box? All else on the return appears correct and understandable.