I am administering an estate. The distributions made this year were of the corpus (principal) to beneficiaries. The interest, dividends, and prior year's tax refund were retained by the estate. As the executor, I have discretion. Meaning, there are no required distributions.
TurboTax is forcing K-1's to the beneficiaries. TurboTax Business asks if I had beneficiaries and how much the received. Then it takes the distribution amounts, adds those numbers into a percentage for assigned to each beneficiary, then it allocates dividends, interest, and royalties to a K-1 of the corresponding beneficiary. I'd rather not have K-1's involved and it seems several people agree (see below). I noted Schedule B, Line 11 TurboTax is populating, the line is "Other amounts paid, credited, or otherwise required to be distributed." These are not "required," as in "all dividends earned must be distributed the tax year they were earned." So what I am doing wrong?
TurboTax has this to say, "The 1041 reports income retained by the trust or estate, as well as the income distributed to beneficiaries, but income taxes are only paid by the trust or estate if the distributions are required. Unless the trust document specifies otherwise, capital gains and losses stay with the trust since they are part of the corpus."
Another website says, "Generally, taxes on taxable income must be paid either by the trust or by the beneficiaries, but not both. If the trust retains income beyond year-end, then the trust must pay taxes on it. However, if the income is distributed, then the beneficiaries pay taxes on it and the trust is permitted to deduct it. "
Thank you for reading this. Desperately looking for an answer. I hope we can answer this for others in the same conundrum.
