I recently was told the tax accountant that I previously used to use for tax returns that I should take the capital gains out of the trust and claim them on the beneficiary K-1 so that I pay the trust capital gains at my own tax rate. Apparently he had done this for my tax returns when I used him in 2013 and 2014. Not knowing this, I have filed my own returns using Turbotax software for 4 yrs; each of those 4 years having the Trust report the capital gains instead of paying the taxes at the beneficiary level as was done previously. After 4 yrs of paying the capital gains at the Trust level, can I go back to paying the taxes at the beneficiary level? The trust document gives me income (though doesn't specify what the income is) and the ability to take as much from principle (corpus) as I need. I understand that your choice is supposed to be consistent, but I didn't know it was possible. I thought the Trust HAD to pay the capital gains taxes and am just now finding out I had the discretion all along. Can I go back to paying the taxes at the beneficiary level? Maybe if I actually take out the capital gains? (I am both sole trustee and beneficiary). Or do I have to go and amend 4 yrs of the Trust's 1041 tax returns and then my own tax returns in order to make it consistent again?
