I withdrew money from a complex trust, does it get reported on the 1041?

[cry-crackly0j]

This was not a mandated dispursement, I needed the money. I entered it as a tier 2 dispursement. Now the state form is telling me that it was 900% of the income for the year, which is not allowed.

[RobertB4444]

You are not allowed to disburse funds in excess of the basis of the trust.  Clearly you had the money in the trust or you wouldn't have been able to disburse the funds.  You need to go back in to the trust information and change the starting basis of the trust at the beginning of the year to reflect the actual value of cash and properties that the trust held at the beginning of the year.

@cry-crackly0j 

[cry-crackly0j]

OK, so problem solved.  The money withdrawn was from principal.  I did not understand the difference between a dispersement and a  distribution of income.  A dispersement from principal (only) should not be reported on the 1041.  I was getting an error message, because I called it a distribution and I took out more than the income for the year, which you obviously cannot do with a distribution of income.