K-1 issuance question

[nosillo2]

Should a K-1 be issued when stock is transferred to beneficiaries.?  There are $1200 in dividends that is under estate because I was not able to do any transfers for 6 months.  The dividends are going to be reported on 1041 since income is over $600.

Shawn

[PatriciaV]

No, distributions of principal (like stock) are not reported on Form 1041 Schedule K-1. Cash distributions from income, however, are included on the K-1.

[nosillo2]

Thank you.  A k-1 was not issued last year to beneficiaries.  How can that be rectified?  Is that through an amendment?  The amount of dividend income will be $300 per person.

[ThomasM125 · Accepted solution]

Yes, you would need to amend the trust tax return to generate the missing K-1 schedules.

[nosillo2]

My brother asked me to provide you with more details and I promise this is it for me.  He will resolve.

2024 - the Estate Brokerage Account was established.  Dividends for  the 3rdand 4th quarter 2024 were reported on Estate Tax Return.  The dividends were reinvested; therefore, no check was issued.  No distributions were made to beneficiaries, and no K-1 issued. $1,200 total dividends for the quarters.

2025 - dividends for 1st quarter March 2025 were issued and reinvested in Estate Brokerage Account.

In June 2025, the stock was transferred/distributed to the beneficiaries from Estate Brokerage Account.

The dividends for 2nd quarter June 2025 were issued after stock transfer/ distribution to beneficiaries, and a check was issued to the  estate and deposited in Estate Bank Account. $1,200 total dividends for the quarters.

Should a K-1 be issued for both years for $1200?

Thank you for your time and patience.

[RobertB4444 · Accepted solution]

Should a K-1 be issued?  Probably.  The tax rate for an estate or trust can be pretty steep.  But if the tax has already been paid on this $1200 for each year then I don't know if I would bother amending a return for it.  As the income was under $3300 it should have been a fairly reasonable amount of tax and you can also deduct any expenses to reduce the tax liability.

If you haven't done 2025 yet then go ahead and include the K1s for this year and let the heirs pay the taxes.  One of the other things that a K1 does is provide transparency to those involved.  

[nosillo2]

Thanks for your reply.  There were expenses in 2024 and no tax was due.  It is going to be more expenses in 2025 about $15k.

Thank you