I'm trustee of a complex trust and can allocate capital gains to the beneficiaries. I distributed $3,000 of $5,000 of the cg. What do I enter as distributions and alloc?

[taxbattler]

If I enter $5,000 as allocable and $3,000 as attributable to income, Schedule D, line 18(a) allocates the entire $5,000 to the beneficiary and $0 to the trust, but the K-1 correctly shows $3,000 cap gain distributed.  If I enter $3,000 allocable and $5,000 attributable, Sched D line 18(a) correctly allocates $3,000 to beneficiary, but the K-1 shows less than $3,000.  I can't find any combination of the two numbers that allocates $3,000 to the beneficiary in both the Schedule D and the K-1.  What should I enter?

[Anonymous_]

I cannot seem to replicate your issue.

I entered $5,000 as LTCG with $3,000 allocated to income and to the beneficiary, then made a distribution of $3,000 to the beneficiary. Note that I also used percentages and that also appeared to be correct.

I have $3,000 allocated to the beneficiary and $2,000 allocated to the trust on Schedule D (18a).

[taxbattler]

Thanks for your quick response.  Do I understand that on the Income tab under the headng Allocation of Capital Gains/Loss, in the subsequent page Allocation of Long Term Capital Gain you entered $3,000 and the next page Enter Gains Attibutable to Income you also entered $3,000?  When I do that, the Schedule D is correct as you note in your test, but the K-1 has a lesser amount distributed to the beneficiary.  Did you check the K-1?  thanks again.

[Anonymous_]

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@taxbattler wrote:

Did you check the K-1? 

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Yes, I did check the K-1. In fact, I also did a test return with two K-1s and both were split evenly (50% each).

In both cases, the figures on the K-1s were correct; $3,000 for the first K-1 and then $1,500 each for the second set of test K-1s.

I am not sure what is happening in your case.

[taxbattler]

Thank you for trying this.  I must have done something earlier in the return that is impacting my results.  I'll redo my return.

[taxbattler]

A couple of years ago I struggled with TT Business to allocate capital gains to a beneficiary.  The trust agreement allows that capital gains can be allocated to income and distributed to beneficiaries.  You responded to my question then, but I continue to have problems with the situation.  I believe the tests you ran back then on the software were successful because there was one source of income--capital gains.  When I have dividends as a second source of income, the software doesn't product a correct answer.  The following is a test that I have run:

I use $6,000 of dividends and $4,000 of capital gains, with a distribution of $8,000 to the beneficiary.  I've tried every combination on the screens "Allocation of Long-Term Gain" and "Gains Attributable to Income," and either the Schedule D is correct or the K-1 is, but not both, as follows:

Allocation        Gains Attributable         Sched B DNI             Sched D to beneficiary          K-1

3,200                        3,200                             9,200                                 3,200                           2,783

4,000                        3,200                             9,200                                 4,000                           3,200

3,200                        4,000                           10,000                                 3,200                           2,855

4,000                        4,000                           10,000                                 4,000                           3,200

I believe the DNI should be $10,000 and the cap gain distribution to the beneficiary should be $3,200 (80% of the $4,000 cap gain) on both the Sched D and the K-1, but there is no combination that provides that answer.  Can you help?