state income tax deduction for a trust

[Jonas1219]

A trust with taxable capital gains pays out all its dividend income to the beneficiary. Turbo Tax (seems to be consistent with IRS instructions) reduces income distribution deduction by amount of state income paid last year.   But beneficiary got all that income.  Credit for state tax would seem to belong to the trust itself in reducing this year's income from capital gains.   If you let the program do what it does, the K-1 to beneficiary shows less income than the beneficiary actually got.  If the beneficiary reports all of the actual income, neither the trust nor the beneficiary is getting the credit for the state tax paid.  Seems as if the deduction for state taxes should be for the trust, not the beneficiary, but don't know how to make it right.

[Anonymous_]

Check Forms Mode.

You should at least be able to allocate the tax according to the income distributed can gains retained by the trust.