Trust - Does the $100 Exemption Apply If No Capital Gains Occured

Forum|Forum|4 years ago
February 21, 2022
3 replies
46 views

My Trust is eligible for a $100 exemption on Line 21 of Federal Form 1041. Because I didn't have capital gains and all of the interest/dividend income is being distributed, this is causing line 23 to be negative $100.

For the federal taxes, this results in $0 tax due for the trust, which I expect.

The negative $100 is then transferred to the Colorado Form DR 105, Line 1. The Colorado taxes due is also $0 for the trust.

I am curious if the exemption should transfer to the Colorado Form DR? Or should my Federal taxable income be $0?

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Best answer by Anonymous_

It really does not matter in terms of the federal return (1041), but you may have to make the adjustment so that the negative $100 does not transfer to your Colorado Form DR.

Anonymous_

Level 15

@Christopher00 wrote:
I am curious if the exemption should transfer to the Colorado Form DR? Or should my Federal taxable income be $0?

It should not. The federal exemption does not apply if the trust has no taxable income (typically as a result of all income being distributed to beneficiaries).

Christopher00Author

Level 3

Thank you again.

In this case, would I manually adjust Line 21 to $0 since all income was distributed and the exemption does not apply?

Anonymous_Answer

Level 15

It really does not matter in terms of the federal return (1041), but you may have to make the adjustment so that the negative $100 does not transfer to your Colorado Form DR.