Form 1041 is an estate *income* tax return. Distributions of corpus are only included on the Schedule B line 10 to ensure that amounts distributed are treated as first coming from DNI. Distributions of corpus are not reported on Schedule K-1 (Form 1041); Schedule K-1 reports the the beneficiaries the beneficiaries share of the items that must be reported on the beneficiaries' individual tax return, i.e., estate income, deductions and credits.
seadrag76, if the property was owned directly by the individuals and not by the estate/trust, what does the trustee have to do with this property? If the property is not part of the estate/trust, it seems that the trustee simply make a bookkeeping error that needs to be corrected and the estate/trust did not receive or distribute any income having to do with this property.
