My mother died in 2019, and I subsequently sold assets and distributed proceeds, in state of California. For one investment, the capital gain was unexpectedly quite large, due to being a limited partnership.
Would there be anything to prevent me from reporting the gain as trust income, rather than distribute to beneficiaries?
Alternately, as trustee, is there discretion on allocating the gain differentially among the beneficiaries? Different beneficiaries received different proportional shares of the distribution.
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@rwhall wrote:Would there be anything to prevent me from reporting the gain as trust income, rather than distribute to beneficiaries?
No, because generally, the default in most states is that capital gain is considered corpus (principal) of the trust and remains with the trust (i.e., the trust has tax liability for the gain unless it is actually distributed).
If you, as trustee, have the authority (discretion) or mandate to allocate gain to the beneficiaries and distribute the gain to the beneficiaries, then that would change the default.
@rwhall wrote:Would there be anything to prevent me from reporting the gain as trust income, rather than distribute to beneficiaries?
No, because generally, the default in most states is that capital gain is considered corpus (principal) of the trust and remains with the trust (i.e., the trust has tax liability for the gain unless it is actually distributed).
If you, as trustee, have the authority (discretion) or mandate to allocate gain to the beneficiaries and distribute the gain to the beneficiaries, then that would change the default.
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