@Opus 17 - let's try this:
<<But what about example #2, where the trust distributes principle. No income, no tax for the beneficiary. Can the beneficiary take schedule A, and if so, why?>>
because the beneficiary paid the medical bills! it's that simple!
The existence of the trust (and any distributions to the beneficiary) has no bearing on the medical expense deductibility issue.
Let's say, instead of receiving $10,000 from a Trust, the OP received $10,000 from Mom and Dad as a gift. The gift doesn't impact the deductibility of the medical expenses, right? ...and neither does a $10,000 payout from a trust! Regardless of where the money comes from, the fact is that the OP paid the medical bills himself with after tax money, and that makes him eligible to deduct them on Sch. A (subject to the 7.5% limitation, etc).
The a) money flowing from the Trust to the Beneficiary (and whether it some of it gets reported on a K-1) and the b) Beneficiary taking the medical deduction have nothing to do with each other.
<<Or example #3, the trust distributes $5000 of principle and $5000 of earnings, the beneficiary reports $5000 of taxable income. How much can the beneficiary deduct?>>
Answer: all the medical bills, just like if there was no trust.... see the bolded statement above 🙂
does that help?
