@RobertB4444
The K-1 has no place that reports principal distributions that I can see nor is there one on the 1041. Let me know what line items, if any, they should be on. DNI is only reported and allocable shares of income and expenses related to the DNI.
The TRUST is an irrevocable complex trust that the TRUSTEE has rights to distribute income or principal. So the TRUST maintains all income and expenses and files a 1041 and has NO DNI deductions for principal distributions. Unless the tax rate of the TRUST is over the beneficiaries, it is best to allow the TRUST to pay all related taxes if the TRUST agreement allows for it. In a COMPLEX TRUST you can move income to lowest tax rate. Some have one person taking all income upon the TRUST reaching certain tax rates.
Since principal only distributions have no impact to tax returns, many spouses would not be made aware of assets of their spouse.
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