I[m preparing a Trust tax return Form 1041. Why does the amount from 1099-Div, line 2a, Total capital gain distributions keep showing up on Form 1041 Schedule D line 18a under column 2 Estate's or Trust? All income and capital gains are supposed to be allocated out to the beneficiary on Form K-1 1041, leaving not taxable income for the trust.
@Barb8 wrote:
All income and capital gains are supposed to be allocated out to the beneficiary on Form K-1 1041, leaving not taxable income for the trust.
You have to allocate the gains to the beneficiaries and to income in Step-by-Step (see screenshots) and then, of course, make a distribution.
The trust would pay tax on the investment income unless distributions were made to the beneficiaries. The capital gain income will flow to line 4 of form 1041 and be included on line 9 "Total Income".
Distributions to beneficiaries would appear on line 18 and be subtracted from the investment income, leaving no taxable income to the trust if all income was distributed to the beneficiaries.
The income would then appear on the K-1 schedules to the beneficiaries.
how is the Trust document constructed? Does it permit the capital gains to be distributed to beneficiaries? If not, then what you are experiencing is correct. If you have a distribution, then it is possible that all income, net of expenses end up on the K-1 EXCEPT the capital gains (including the capital gains distribution)
So to confirm, on the screen for Allocation of Short-Term Gain, I put the net ST gain from 1099-B, for Allocation of Long-Term Gain, I put the net LT gain from 1099-B, and for Other Gain Attributable to Income, I put the total of ST and LT gains from 1099-B. Where does 1099-DIV line 2a Total capital gain distributions go. And the trust agreement gives the trustee discretion to allocate capital gains to the beneficiaries.
Thanks for all of your help. This is the first full year for this trust and I want to get it correct and be consistent in future years for allocating gains to beneficiaries.