There seems to be a misunderstanding here. I asked the question while working on the return as it involved how much taxable income would need to be attributed to the beneficiary on the K-1. My question did not reflect the date I distributed assets to the beneficiary. (I distributed more than enough to cover the taxable income prior to the deadline for 2021.) This issue seems to have gotten more complicated and confusing than intended.
Here was the question: The trust's only income was $41,000 of ordinary dividend income, $40,000 of which were qualified dividends. It also had $3,000 capital loss carryover. My question was, can the trust allocate $38,000 taxable income to the beneficiary and have the $3,000 loss carryover offset the remaining income in the trust, thereby leaving no taxable income in the trust? If the answer to this is no (as you initially indicated), no further discussion here is necessary. I understood this to be your answer and I filed the return accordingly. If the answer to this however is yes, my next question is, then what qualified dividends would be attributed to the beneficiary on the K-1 since it wouldn't be the full $40,000? The answer to this is still of interest to me as I file this return every year and want to understand how it works.
