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

[Oak_Fid_Agent]

I'm going to start from scratch and create a brand new document.  Maybe there was a problem when I saved the original. Perhaps it didn't erase some of the information and the override didn't work.  I'll let you know.

this is incredibly frustrating but I'm not going to give up!

I appreciate your time helping me work out these kinks.

[Anonymous_]

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@Oak_Fid_Agent wrote:

......But I should be able to allocate some of all of the distributions to the trust, no?  

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Yes, absolutely, assuming the trust doc gives you the authority to do so.

[Oak_Fid_Agent]

Ok I went back into the program and did it 2 ways:  allocated all the qualified dividends to the beneficiaries and then allocated all of the qualified dividends to the trust.  In both instances, the amounts on the K-1 forms were identical.  So, clearly there must be a glitch in the program.  Can you please try a hypothetical both ways to see if your K-1 changes?  So you think it is because the IRS wants someone to pay taxes and if the trust has a negative taxable income it forces the beneficiaries to pay taxes?  

[Anonymous_]

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@Oak_Fid_Agent wrote:

Can you please try a hypothetical both ways to see if your K-1 changes?  

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I have, in fact, tried it both ways and the program returns the correct result. 

I'm not sure why you continue to refer to "allocating...qualified dividends" since, as been mentioned previously, the allocation of qualified dividends will follow the allocation of ordinary dividends. I'm really not sure what you're trying to accomplish at this point but I can't see your return nor do I have all of the figures you're using.

If you want to post all of the figures you're using in your return, I would absolutely be willing to input them into my test return. 

[Oak_Fid_Agent]

Here are the values from the 1092 form

1. interest income 3665

2. ordinary dividends: 19,879

3. qualified dividends: 8397 to beneficiary and 3031 to trust (tried it both ways--0 to beneficiary and 100% to trust)

4.capital gain -3000

9 total income: 20,544

12. fees: 1918

14: fees 160

18: income distribution deduction 21,466

21 exemption 100

22 21,566

23 taxable income: -3100

Schedule B: 

1. 18,466

2. 1,524

3. 0

6. 3000

7" DNI: 22,990

8. accounting income 22,990

10. other amounts paid  471,329

12. tax exempt 1,524

13, 471,329

14, 21,466

15, 21,466

there were 6 beneficiaries. distribution percentages: 4 were at 6.11%, one at 51.377 and the last at 24.15

If the allocation of "qualified" follows "ordinary how do I allocated "ordinary" to the trust vs. the beneficiaries?

[Anonymous_]

You have DNI of $22,990 and I'm not sure why you're hung up on dividends here.

You could simply allocate circa $6,000 to the trust which would serve to reduce the tax liability of the beneficiaries while the trust's tax liability would be nil.

[Oak_Fid_Agent]

Exactly! but the million dollar question is how do I allocate it to the trust?  That is the missing piece and once I figure it out I'll feel like a dope.

[Anonymous_]

Do the math for the beneficiaries and only distribute, for example, $16,990.

Obviously, you'll have to split that figure to account for the difference in percentage allocations to the beneficiaries, but it should work perfectly (and it doesn't have to be exactly $6,000 that is retained by the trust).

[Oak_Fid_Agent]

BINGO.  OMG here's the problem.  In TT it asks for second tier distributions. It fails to say that this value should ONLY be from the DNI--instead, I and others likely included ALL distributions which of course force ALL dividends and interest to go to beneficiaries.  I searched the online forum and saw a post about this from a few years back. TT should change wording to indicate ONLY include distributions from the DNI (interest and dividends) NOT trust corpus.  I guess the IRS doesn't really care what is distributed from the trust corpus and there's no where on the 1041 to include that, which makes sense since it is not taxable income.

[Oak_Fid_Agent]

Well, after numerous back and forth, a newbie like me became educated!  I can't thank you enough for your help.  I do strongly suggest asking TT to reword that question to avoid frustration by others.  The issue is NOT splitting dividends between trust and beneficiaries, it is reporting ONLY taxable income as distributions.  

I am sure those who have more knowledge of trust taxes likely figured this out (or just paid someone to do their taxes).  For those of us who use TT we need all the help we can get.

So thank you!!!