Difference between first tier and second tier distribution from trust

wdhanig — Sat, 21 Feb 2026 20:38:42 GMT

An earlier discussion comment said

Tier 1 distributions are distributions of current income that are required to be made according to the terms of the governing instrument and the applicable local law (whether actually made or not).

Tier 2 distributions are any other amounts paid, credited, or required to be distributed (and actually distributed).

I'm confused:

TTax says the account income is $1,107. This appears to be qualified dividends minus Section 199a dividends minus interest.
However, the capital gain on 1099 is $4,070, which I've assigned to the beneficiary.
Total actual distribution is $5,000.

What are the correct Tier 1 and Tier 2 entries?

Re: Difference between first tier and second tier distribution from trust

ThomasM125 — Fri, 27 Feb 2026 13:57:50 GMT

Tier one is income that must be distributed, based on the stipulations in the trust or governmental requirements. Tier two is all other income of the trust. So, you would have to determine if the capital gain income and the other income you mention is required to be distributed in the current year. If so, it would be tier one.

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Difference between first tier and second tier distribution from trust

Re: Difference between first tier and second tier distribution from trust