Complex Trust Discretionary Distribution

Forum|Forum|4 years ago
March 2, 2022
1 reply
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I am the Trustee of a Complex trust, and I made a discretionary distribution to the beneficiary in 2021 for a capital gain realized in 2020. The trust paid the capital gains tax in 2020, so the 2021 discretionary distribution should be tax free to the beneficiary. TurboTax Business is requiring designation of Income Distribution (either % or $), but because this is a complex trust, there is no such requirement. Any suggestions on how I address this in TurboTax Business?

Anonymous_

Level 15

Did you allocate the gain to the beneficiaries and/or to income in the program?

If so, remove those figures from the Allocation of Captial Gains (Loss) section.

OdewalterAuthor

Level 2

Thanks for the quick reply. I did not allocate any of the gains to the beneficiary in the year earned. The trust paid the taxes directly and added the after-tax gain to the Trust's principal balance. I subsequently made a partial distribution to the beneficiary. My question is how to reflect this is TurboTax. When in indicate that a distribution was made, TurboTax is requiring a designation of how the Trust income is distributed. Because this is a Complex Trust, no income distribution is required. TurboTax isn't giving me that option.

Anonymous_

Level 15

Distributions of corpus are not shown on your K-1s.

There is no need to issue blank K-1s to your beneficiaries (other than to inform them that they do not need to enter any figures into their personal income tax returns).