@Steelydan989 wrote:
This all does relate to my original question.
Actually, it does not. Your original question was:
We're paying out all taxable income to the beneficiary. In creating the K-1, since ordinary dividends have been reduced by $3,000, the resulting amount is greater than the qualified dividends. I'm assuming it's a problem if the K-1 reflects greater qualified dividends than ordinary dividends. How can I resolve this?
As I stated, this thread has morphed from "paying out all taxable income" and "greater qualified dividends than ordinary dividends" (which I stated was not possible) to you stating that you did not have to pay out all income and why the $3,000 in capital loss was ostensibly lost to whatever this is now.
Regardless, I believe @jtax indicated that if you withhold $3,000 of the income distribution (so you would distribute $38,000), then the $3,000 capital loss would wipe out the $3,000 of dividend income that was not distributed. As I stated much earlier, if you distribute all of the dividend income, that result would not obtain.
