I understand depreciation in a trust is more of a cash concept.
Im trying to figure out an example of a difference where the affect is different if the trust keeps the depreciation or it is directly allocated to the beneficiary. How would the taxable income distributed be different and how does this affect the taxes of a trust. This would affect the trust if they were accumulating? Also, if the trust doesn’t allocate the depreciation to the beneficiary doesn’t that decrease the distribution deduction for the trust?
if the trust keeps the depreciation and makes a reserve, the reserve then is distributed to the beneficiaries as principal on sale of the property?
If the trust kept the depreciation, who should be responsible for the recapture when sold?
