Real estate sale in a trust

[Farmgirl123]

We have land in simple trust that is sold.  The trust instrument states to distribute as principal.  Does the trust itself pay the tax?   I think that makes sense since the document said to distribute the sale as principal (I would assume gain and all because the remainder beneficiaries are the same as the income beneficiaries).  If the trust distributed all the income they shouldn’t have to pay any tax on that gain because their tax rate is below the threshold?

if you are distributing that gain as pricinpal it seems to me it shouldn’t be reported as DNI?  

[M-MTax]

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@Farmgirl123 wrote:

if you are distributing that gain as principal it seems to me it shouldn’t be reported as DNI?  

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What do the provisions in the trust provide, exactly? Also, is the trust terminating and filing its final 1041?

Capital gains typically remain with the trust (corpus) and do not get distributed to beneficiaries via a K-1. However, that can change dependent upon trust language and past practices on the part of the trustee. If the gains are treated as income, they can usually then be distributed to the beneficiaries.

[Farmgirl123]

Trust document says distribute sale as principal.  So wouldn’t the trust pay the capital gains?   Also, couldn’t they distribute the gain as principal?   Remainder and income beneficiaries the same.  

What would the gain tax rate be if the trust has no taxable income that year?