1041 Tier 1 vs Tier 2

[taxbattler]

I'm trustee of a trust that has a 3% unitrust required distribution.   The distribution usually exceeds accounting income and DNI.  Tier 1 is described on the TT form as 'Required Amount' (of the amount distributed to a beneficiary.  However, if the required distribution exceeds accounting income, should the excess be put in the Tier 2 box?  A previous post claimed that you don't have to enter the excess in either box because all of the trust accounting income would have been distributed to the beneficiary to pay tax on it.  But if I put the excess in the Tier 2 box, an amount is shown on the K-1 in Box 12 as an Alternative minimum tax adjustment.  If I don't report the excess in either Tier 1 or Tier 2, then there is no amount in the K-1 Box 12.  So my question is how should the excess be shown, Tier 1, Tier 2, or not at all.

[tagteam · Accepted solution]

Generally, an amount that exceeds DNI would be considered corpus and not reportable.

[taxbattler]

Thanks.  So I'll apply the unitrust distribution to Tier 1 up to the amount of Accounting Income/DNI and any excess will not be reported.