@Bozodclown wrote:
I did find the missing income in their proper income categories on the 1040. Thanks for your help. Maybe you can also tell me why on the 1041 "Distributable Income for Schedule K-1" worksheet the values on line 14, "Amount Distributed", are less than the values on line 13, "Total Distributable". It's a mystery to me.
In general a trust need not actually distribute all of it's income to beneficiaries. It can retain (and pay tax on) some income.
Say for example the trust language gives bene A $1000 a month paid from trust taxable income. The trust's only income is $15000 in dividends and it has no expenses. Then the trust could distribute $15000 of dividends but it only distributed $12000 leaving $3000 at retained trust income. (Perhaps rather than a requirement of $1/k it might help to think of the trustee having discretion to distribution whatever the trustee chooses and trustee chooses $1k/month this year.)
The way to think about it (assuming the trust is not a partial grantor trust) is that the trust pays tax on all of it's income, but it gets a deduction for income distributed to beneficiaries. (This is oversimplifying. There are nuances and exceptions.) The deduction of the income distribution deduction. See 1041 Schedule B. This deduction cannot exceed "DNI" (distributable net income). Any income so deductible is attributed to the beneficiary via a K-1 and reported on the beneficiary's k-1.
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