On form 1041, beneficiaries get divs & int on form K-1. Yet, the TT business wrongly adds that income to the trust. How is div/int excluded from trust income?

[JeffreyR77]

The K1 reports the beneficiaries share of income and deductions of Trust income and deductions. 

It is appropriate that the K1 income is included in Trust income as that is what is being distributed in accordance with the Trust document.

[buffalogr]

Line 2b—Qualified Dividends

Enter the beneficiary's allocable share of qualified dividends on line 2b(1) and enter the estate's or trust's allocable share on line 2b(2).

The software won't let me enter the above line.

Further, the trust document says that divs & interest are passed through to beneficiaries. I just want to know how to do it in the software. otherwise, divs & interest are taxed to the trust and then again to the beneficiaries.

[JeffreyR77]

With 100% of the accounting income being distributed to the beneficiaries, there is no trust allocable share.

Until you complete the distribution section, 100% will remain allocable to the trust and 0% to the beneficiaries.  

When all the income has been allocated to the beneficiaries there is nothing to allocate to the trust. 

There are several screens in the TurboTax interview where you input the beneficiary allocation either by dollar amount or percentage of the income. 

There is a final confirmation that you have allocated the income.

In this complex trust example, the income was taken out of taxable trust income and will only be taxed by the beneficiaries.