@MonkeyReadMonkeyDo wrote:
After further research this allocation also seems to contradict Separate Share Rule (section 663(c)).
That would be in the terms of the trust, which would prevent distributions to one or more beneficiaries from affecting the interests of the other beneficiaries.
Regardless, tax needs to be paid on the taxable income and either the trust or the beneficiaries receiving distributions will have to pay it. Distributions carry out DNI so trustees cannot generally pick and choose which of the distributions are taxable to which beneficiary and which are not.
If the terms of the trust are complex, the corpus is large, and there are multiple beneficiaries with varying interests, you should really consult with a local trusts and estates attorney for liability purposes if nothing else.
