Complex trust: turbo tax does not change K1 forms when qualified dividends split between trust and beneficiaries (line 2b)

[Oak_Fid_Agent]

I am the trustee of a complex trust.

I entered the qualified dividends on line 1b.  I want to attribute some to the trust and some to the beneficiary.

However, the values for beneficiary's share of current year income etc. is the same whether ALL or SOME of the qualifies dividends are allocated to the beneficiaries vs. the trust.  This does not make sense.

How can some of the income be allocated to the trust so that the trust pays the tax?

[Anonymous_]

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@Oak_Fid_Agent wrote:

How can some of the income be allocated to the trust so that the trust pays the tax?

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When you make a distribution in the program, you can make a selection as to how much (or what percentage) is allocated to the beneficiary(ies).

The qualified dividends will follow the ordinary dividends (in proportion) as qualified dividends are merely a subset of ordinary dividends.

[Oak_Fid_Agent]

I overrode the program and entered a dollar amount on line 2b for the beneficiaries and a dollar amount for the trust.  The values on the K-1 form were identical to whenn all of the dividends were automatically allocable to the beneficiaries.

[Oak_Fid_Agent]

I don't know what you mean when you say "make a distribution" in the program.

I entered the exact dollar value of each beneficiaries distribution. All of the money in the trust was NOT distributed. About half still remained in the trust (in a separate account with same tax ID).  So I want some of the dividends to be allocated to beneficiaries and some to the trust (as these dividends were added to the principle which remained in the trust).

TurboTax does not seem to allow me to do this.

[Anonymous_]

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@Oak_Fid_Agent wrote:

TurboTax does not seem to allow me to do this.

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That's because the qualified dividends, by default, are allocated to the beneficiaries in the same proportion as the beneficiaries share of DNI (other tax programs operate in the same manner, FYI).

If, for example, the beneficiaries are receiving 50% of DNI (and the income is 100% dividends), then they are allocated 50% of the qualified dividends. 

[Oak_Fid_Agent]

Yes, that is exactly what is happening. Each beneficiary is allocated the exact proportion of the qualified dividends as their share of the DNI.  So, then, is there no way to over-ride this so that the trust pays some of the tax?  In my case, the trust is paying zero tax (with write offs a a 3K capital loss) and moving some of the dividends to the trust will save the beneficiaries taxable income.

It is also not accurate when the trust DID keep some of the interest.

[Anonymous_]

If the trust is a complex trust (marked as such in the program) and you have the authority to do so, then you can make any allocation you want (again, as long as the trust does not require you to distribute all income currently).

[Oak_Fid_Agent]

I am sorry, I am still confused.  I tried to allocate some qualified dividends to the estate/trust  (line 2b (2) but the K-1 that was generated was not different from when NO qualified dividends were allocated to the estate.  How can I force the program to allocate some dividends to the trust and have the values change on the K-1s?  the only place this is possible is income line 2b.  Yet changing these numbers makes no difference on the K-1.  Yes I did check complex trust and no the trust does not require me to distribute all the income annually.  again, it appears there must be something not working in the software, as no matter what I enter in lines 2b the K-1s that are generated do not differ.  

[Anonymous_]

Now I'm confused. Are you trying to vary the ratio between ordinary dividends and qualified dividends?

You should simply be able to distribute the ordinary dividends however you want and the qualified dividends will follow in that same percentage. 

[Anonymous_]

Crude example for this scenario:

Ordinary dividends: $10,000

Qualified dividends: $6,000

Distribute $5,000 to the beneficiaries; $5,000 allocated to the trust (total $10,000)

$3,000 of the qualified allocated to the beneficiaries and $3,000 allocated to the trust.

[Oak_Fid_Agent]

sure--if I could distribute ordinary that would solve the problem. How do I do that in Turbo Tax?

there's just one line (2a) to enter ordinary dividends and it does not allow me to decide what amount to allocate to the trust and what amount to beneficiaries. I do understand that whatever the allocation is from ordinary will follow through to the qualified. The amount on line 2a is from 1099-DIV forms.  I have two forms--One that indicates what the trust KEPT and the other that was distributed to the beneficiaries.  TT only allows me ONE entry for line 2a.

[Anonymous_]

You can't enter more than one 1099-DIV on Line 2a; the 1099-DIVs are combined (even if the trust receives a dozen or more). 

Although I understand that you may have received more than one 1099-DIV, I fail to understand your statement to the effect that "One that indicates what the trust KEPT and the other that was distributed to the beneficiaries" as 1099s generally don't dictate what is distributed to beneficiaries and what is retained by a trust.

The following are screenshots of what I get when I enter the figures (and distributions) in the hypo from my previous post.

[Oak_Fid_Agent]

I am able to split the amount on line 2b.

What form is the PART III below? I looked through every form and I don't see it.

[Anonymous_]

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@Oak_Fid_Agent wrote:

What form is the PART III below? I looked through every form and I don't see it.

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That is Part III of a K-1.

[Oak_Fid_Agent]

I created two tax files.  The first ws with all dividends going to the beneficiaries and the second with some to the trust.  You can see that the K-1 forms that were generated were identical in both cases.  

Now I'm wondering if the reason this is the case is that the trust is paying zero taxes and the IRS wants its money so is not allowing the trust to take any of the dividends? But I should be able to allocate some of all of the distributions to the trust, no?