Simple Trust distributions

[bigdav160]

This has been an ongoing issue with TurboTax business and me for years so it's probably something simple that I am doing wrong. It's a irrevocable Simple Trust and designated as such. However, TurboTax allocates all the bank interest and stock dividends to the Trust.  For example, this year the Trust earned $500 in interest, $7000 in dividends and $7,000 in capitol gains. The Trust income line 18 is $14,500. The K1 distributions line 18 amount is zero. The amounts on the K1 are zero. I do not know how to fix this.

[tagteam · Accepted solution]

The 1041 module in TurboTax Business can be quirky. 

You most likely just need to go through the Distributions section and actually make a distribution to the beneficiaries (even though you should not have to do so in the case of a simple trust).

[Anonymous]

by the way in a simple trust capital gains are genearlly not distributed to benes  just ordinary income.   However  since i can't see the trust document i can't say for sure however from IRS instructions for 1041

Simple Trust
A trust may qualify as a simple trust if:
1. The trust instrument requires that all income must be distributed currently;
2. The trust instrument doesn't provide that any amounts are to be paid, permanently set aside, or used for
charitable purposes; and
3. The trust doesn't distribute amounts allocated to the corpus of the trust.
capital gains are corpus.  s if you been distributing them then you have a complex trust. 

[Anonymous]

I would also add that unless the trust document permits corpus distrubtions,  if you been distributing them,  you may want to consult a lawyer.   bad things can happen to the trustee. 

[WINSOME81]

i have credit shelter that files as a simple trust . I have distributions , federal tax deduction and state tax deduction. how do Where do I enter the federal tax deduction?

[WINSOME81]

I entered t he distribution amount in the section. what section does the for federal tax belong?

[WINSOME81]

the problem is thubmitted ti this is a Beneficially IRA . The Tax was submitted  to the IRS and heas returned. how?

[WINSOME81]

thanks

[bigdav160]

I went and changed the distribution scheme from percentages to the exact amount of interest/dividends and it made no change to the amount of tax the Trust owed or to the amount distributed (zero) on the K1. I guess I have to learn how to do this by hand. Not only is it a Simple trust, it's a simple trust with one bank account.

And yes, I know the difference between the Simple and Complex Trust. I am not trying to distribute capitol gains only interest and dividend income.

Instead of double taxation this year I'll send the IRS a check with an extension so I can figure out what is going on here.

Thanks

[tagteam]

@bigdav160 Enter Forms Mode, open one of your K-1s, and ensure that there is a percentage in Part B of the Beneficiary's Allocation Smart Worksheet.

[bigdav160]

Thanks tagteam but the percentages are there on the form.

Just under that (part 3) should those lines be blank?

Should the K-1 Worksheet be blank? Form - Distributable Income for Schedule K-1 does show amounts in line 1 and 2. It's part 2 of that form where the amounts get zeroed out and I am not sure what all those numbers represent.  I would guess the answer to my question is in there.

[tagteam]

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@bigdav160 wrote:

Just under that (part 3) should those lines be blank?

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No, Part III should not be blank if you distributed interest and dividend income to the beneficiaries.

Frankly, I am not certain as to precisely what is occurring in your case, but the income should be flowing through to your K-1s if you made a distribution in the program.