Background: I have a "complex trust".
It earns interest, dividends, short term capital gain distributions, long term capital gain distributions, short term capital gain from asset sales, and long term capital gain from asset sales.
Trust rules allow me to distribute interest, dividends, and short term capital gain distributions from the trust and pay the taxes in my 1040.
Questions:
1. Can I do the same - distribute from the trust and pay taxes in my 1040 - for long term capital gain distributions, short term capital gain from asset sales, and long term capital gain from asset sales?
OR do I have to pay the taxes for these three types of earnings in the 1041?
2. If I have to pay the taxes for these three types of earnings in the 1041, can I then distribute the after tax earnings out of the trust?
3. Last year the trust only earned interest and dividends as reported on the 1099; which I entered into TurboTax . I also entered into TurboTax the amount I had distributed out of the trust. TurboTax automatically generated a K1 allocating my distributed interest and dividends.
This year I have more types of income. If I am allowed to distribute all of those types of income, will the TurboTax generated K1 allocate each type? If not, what will I see on the K1?
