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hntrust
Level 3

Negative accounting income for trust

Accounting income is negative under the Distributions tab. Screen says "Was All The Trust's Income Distributed".  There were actual distributions made to the beneficiary even though there were large deductions that caused income to be negative. So do I select "Yes"?  Does this carry out the losses to the beneficiary on the K-1? Or do I just select "No" which results in no income reported on K-1? Or do I select neither?  I thought that trust losses can't be transferred out of the trust and the used by the beneficiary to offset other income.

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Accepted Solutions
tagteam
Level 15

Negative accounting income for trust

" Does this carry out the losses to the beneficiary on the K-1?"

No. Since your AGI here is negative, there is no income to distribute to the beneficiaries. Thus, any distribution you made would have been from corpus (principal) and would be reported as a second tier distribution.

" I thought that trust losses can't be transferred out of the trust and the used by the beneficiary...."

That is generally correct; losses cannot be passed through to the beneficiary until the trust terminates and then files an income tax return for the trust's final year.

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1 Reply
tagteam
Level 15

Negative accounting income for trust

" Does this carry out the losses to the beneficiary on the K-1?"

No. Since your AGI here is negative, there is no income to distribute to the beneficiaries. Thus, any distribution you made would have been from corpus (principal) and would be reported as a second tier distribution.

" I thought that trust losses can't be transferred out of the trust and the used by the beneficiary...."

That is generally correct; losses cannot be passed through to the beneficiary until the trust terminates and then files an income tax return for the trust's final year.

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