I am the Grantor and Trustee of a Revocable Living Trust. The Trust is fully funded by principal only. No interest income, investments, land, or personal property. All taxes were paid before the money was moved to the trust, and the funds earn no interest. So if I make distributions to the beneficiaries, they will not owe taxes since the distributions are strictly from principal.
My understanding though, is that I still need to provide each beneficiary with a Schedule K-1 in order to provide them with a document that show's that they don't owe taxes, but there isn't a line on the schedule to report NON-TAXABLE distributions from principal. There are only lines to report taxable distributions from income. My question is, where (or what line, or other document) do I report the non-taxable principal distribution to the beneficiary?
