My father's irrevocable trust has always been classified as a simple trust in Turbo Tax. All of the income is distributed to my mother. Income has always been only dividends and interest. This year the trust also distributed capital gains as well as dividends and interest. I noticed that Turbo Tax has now classified it as a complex trust. Why?
" I noticed that Turbo Tax has now classified it as a complex trust. Why?"
The presumption is that capital gains are corpus (principal) of the the trust and, as such, the gains remain with the trust and are not distributed until the trust is terminated and files its final return (trusts are always complex trusts when filing final income tax returns).
Accordingly, when capital gains are allocated to income and distributed to the beneficiary(ies), the program automatically treats the trust as a complex trust (the program will change the type of trust will change from simple to complex).
" I noticed that Turbo Tax has now classified it as a complex trust. Why?"
The presumption is that capital gains are corpus (principal) of the the trust and, as such, the gains remain with the trust and are not distributed until the trust is terminated and files its final return (trusts are always complex trusts when filing final income tax returns).
Accordingly, when capital gains are allocated to income and distributed to the beneficiary(ies), the program automatically treats the trust as a complex trust (the program will change the type of trust will change from simple to complex).