Final Year Trust Accounting Income (dividends)

[bjc60640]

Must Final Year Trust Accounting Income (dividends) be passed to beneficiaries along with LT Cap Gains? I am preparing the final return for a trust which had dividends earned in the final year and all funds in the trust are being allocated so the trust will close. There are also LT Capital Gains which I am allocating to the 6 beneficiaries of this trust. However when the K-1s are created, the dividend income is allocated like the capital gains, and Box 14 has an E in it for the amount of the dividends. So it appears that beneficiaries would have to pay taxes on those dividends. I would think that the income for the current year would be treated like the distributed funds and not be taxable to the beneficiaries except for the LT Cap Gains 

[tagteam · Accepted solution]

Box 14 (E) is for reporting the NIIT if the beneficiaries are subject to it (i.e., higher income taxpayers).

All income and gain are passed through to the beneficiaries on the trust's final return and allocated per the governing document.

[bjc60640]

All the securities in the trust were sold and all of the funds distributed according to the trust documents. I know the capital gains are taxable to the beneficiaries. But there were $16,000 in qualified dividends earned by the trust which were part of the final funds distribution and showing up as Accounting Income in TT, and showing up in box 2a and 2b in each K-1, allocated the same way the capital gains are allocated. So when the beneficiaries enter these amounts, they will be taxed on the dividends as well as the Capital Gains. Shouldn't the dividends be part of the distribution and not be taxable?  Can't see how to enter the dividends into TT and not have them show up on the K-1s

[tagteam]

The dividends are income and passed through to the beneficiaries.

[bjc60640]

Ok. That's what I figured. Thanks