I’m working on a trust tax return. Trust is irrevocable for education purposes. There are 11 beneficiaries under the same trust. I’m confused about the way TT allocates taxable income to the beneficiaries who got distributions. After much googling, ChatGPTing and Copiloting it seems the advice is to input the total distribution amounts in the Distribution screen, however that leads to almost the entire trust taxable income amount being allocated to a couple beneficiaries. Since there are 11 beneficiaries you can imagine that 2 beneficiaries with distributions will get huge a huge personal tax bill. After further research this allocation also seems to contradict Separate Share Rule (section 663(c)). Could anybody explain to me how do I fix it in TT? The only plausible way I came up with so far is to input only distributed taxable share of income in the TT distribution allocation screen, not the entire amount. Will I be at risk from fiduciary liability prospective? Will trust beneficiaries have problems with IRS to defend the source of the money they received if ever audited?
