I had a long-term capital gain in my irrevocable trust from selling land. Is that taxed at the trust level or passed to the beneficiaries on form K-1?

we can't see the trust agreement. however, under the tax laws if you are both the grantor and beneficiary the trust is treated as a grantor trust which means all income and expenses pass through to the grantor. whether a grantor trust return needs to be filed depends on what Identification number was used to report the capital gain. if it was the trust a grantor trust needs to be filed. if not, then the transaction is reported on your 1040. even if not a grantor trust, the trust may allow the trustee to pass the capital gain through to the beneficary. 

 

the tax rules for what is a grantor trust are spelled out in code sections 671-678

 

Under those rules, a grantor trust is any trust in which the grantor retains one or more of the following powers:

• A reversionary interest of more than 5% of the trust property or income;
• The power to revoke the trust and/or to return the trust’s corpus/principle to the grantor;
• The power to distribute income to the grantor or grantor’s spouse;
• Power over the beneficial interests in the trust;
• Administrative powers over the trust allowing the grantor to benefit.

A trust will also be deemed to be a grantor trust under either of the following circumstances:

• A trustee, beneficiary, or other person a power exercisable solely by himself to vest the corpus or the income therefrom in himself;
• A United States person who directly or indirectly transfers property to a foreign trust.

 

Thanks for the replies. Yes, the link to Cornell explained that it depends on some different things (including the verbiage in the 'governing instrument', local laws and the intent of the fiduciary). In my particular case, I have determined that any capital gains would be 'distributable net income' after thoroughly reading the trust document and its amendments. 

May I suggest that the software in TurboTax Business be updated to ask those pertinent questions before making assumptions about the capital gains in a trust.

Thanks, again, for your help.... Roger F