>so let's assume that the Trust doesn't distribute anything until March of the following tax year
>and neither the trust or beneficiary made estimated payments
>during the current tax year related to this trust income, are any penalties due from either party?
>The beneficiary is still reporting that income from the March,
>next year distribution as part of the current year tax return......
>Possibly, if the trust made a 663(b) election, the beneficiary received income in March,
>and the beneficiary did not make sufficient estimated tax payments
>(or have sufficient withholding)
>during the tax year (i.e., quarterly payments due April, June, September, and January.
I don't know. To be clear lets say the current tax year is 2023. Trust T distributes a discretionary distribution to bene B in Feb 2024 and makes a timely 663(b) election in T's calendar year 2023 1041 (filed in 2024). B receives a 2023 K-1 for income portion of the distribution. There is no other distribution from T to B in 2023.
Seems to me most likely that
- T has no estimated tax liability on the distributed income. T gets a distribution deduction and therefore has no taxable income (on the distributed income anyway)
- B has no estimated tax income from T because the distribution was not received during the tax year per Rev. Rul. 78-158.
- that makes sense (from a policy not legal perspective) because the distribution not only was not not received in the tax year (2023), but it was received after the last estimated installment date of 1/15/24. And B may have had no advance notice.
- I also don't see (at first look) that B has an requirement of an estimated tax payment on the distributed income for 2024 because the distribution income is only taxed in 2023.
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