topic Allocation of Capital Gains in a Trust in Get your taxes done using TurboTax

Allocation of Capital Gains in a Trust

Mark1150 — Mon, 09 Mar 2026 08:08:54 GMT

Question on the allocation of Capital Gains in a trust. Does the fiduciary/trustee have the option of choosing where the capital gains should be taxed - at the trust level or at the beneficary(s) level? I have a beneficiary that would prefer not to get K-1(s), and it looks like TurboTax Business 2021 gives the fiduciary/trustee the option of where to place the capital gains, both for the Fed and the State (CA). Note that I did distribute funds from the trust to the beneficiaries in TY2021, which was the source of the capital gains. I know the taxes will be higher on the capital gains in the trust. Thank you.

Re: Allocation of Capital Gains in a Trust

Anonymous_ — Sun, 13 Mar 2022 19:03:07 GMT

You, as trustee, need to refer to the governing document (the trust itself) to determine whether or not you must, or have the discretion to, distribute capital gains to the beneficiaries.

Re: Allocation of Capital Gains in a Trust

Mark1150 — Sun, 13 Mar 2022 19:09:36 GMT

Thank you. I will double-check, but I believe I have that authority in the trust document. If so, is the IRS (and CA state) ok with leaving the capital gains in the trust, with the trust paying the taxes, and no K-1's issued to beneficiaries?

Re: Allocation of Capital Gains in a Trust

Anonymous_ — Sun, 13 Mar 2022 19:15:38 GMT

Yes, provided you have the discretion to do so.

Re: Allocation of Capital Gains in a Trust

Mark1150 — Sun, 13 Mar 2022 19:16:58 GMT

Very good, thank you.