Trust K-1 to 1040

[Bozodclown]

I'm doing a 1041 for a trust for the first time.  I'm wondering why some of the income on a K-1 isn't showing up on a K-1 recipients 1040.  Only line 5 (other portfolio and business income) of the K-1 appears on the 1040 but nothing from line 1 or 2 (interest and dividends).  Could this be correct?  I'm using TT Business to prepare the 1041 and TT Deluxe for the 1040.  I don't want to have these returns reviewed by a professional.  

[Anonymous_]

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@Bozodclown wrote:

Only line 5 (other portfolio and business income) of the K-1 appears on the 1040 but nothing from line 1 or 2 (interest and dividends).  Could this be correct?  

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Yes. The program will take the interest and dividend income you enter from your K-1 and disperse it to the appropriate schedule or form of your individual income tax return (most likely Schedule B).

[DianeW777]

If there is interest and dividends on the 1041-K1, these same amounts should show up on the Form 1040.  The K1 is used to carry the taxable income from the trust to the individual as you know. Keep in mind that if the amount is less than $1,500 for either then Schedule B will not be required.

The amounts should show up on Form 1040, Lines 2 & 3.  

1. Open or continue your return. (TurboTax Online)
2. With the Tax Tools menu open, you can then:
   • View only your 1040 form: Select Tools. Next, select View Tax Summary in the pop-up, then Preview my 1040 in the left menu.
3. TurboTax CD/Desktop - Select Forms (upper right) > Scroll to Form 1040
4. See the images below

[Edited: 02/24/2022 | 1:50p PST]  @Bozodclown

[Bozodclown]

It's Schedules 1 and E that show the amount that appears on the 1040 at line 8.  There must be some reason why the other forms of trust distribution that are on the K-1 haven't been transferred to the 1040.  There are values on the K-1 for "Net Investment Income" and "Adjustment for Net Investment Income" on line 14 but every which way I do the math, I don't come up with the value that appears on the 1040.  Looks like the $150 I've spent on the software was a waste of money.  Maybe the end result is accurate, maybe not.  But, as trustee of a family trust, I need to know that it's correct.  The math has to make sense to me or I'll have pay a pro to check it for errors.       

[Bozodclown]

I did find the missing income in their proper income categories on the 1040.  Thanks for your help.  Maybe you can also tell me why on the 1041 "Distributable Income for Schedule K-1" worksheet the values on line 14, "Amount Distributed", are less than the values on line 13, "Total Distributable".  It's a mystery to me.   

[Bozodclown]

I did find the missing K-1 income in the 1040.  Thanks for your explanation. 

[jtax]

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@Bozodclown wrote:

I did find the missing income in their proper income categories on the 1040.  Thanks for your help.  Maybe you can also tell me why on the 1041 "Distributable Income for Schedule K-1" worksheet the values on line 14, "Amount Distributed", are less than the values on line 13, "Total Distributable".  It's a mystery to me.   

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In general a trust need not actually distribute all of it's income to beneficiaries. It can retain (and pay tax on) some income.

Say for example the trust language gives bene A $1000 a month paid from trust taxable income. The trust's only income is $15000 in dividends and it has no expenses. Then the trust could distribute $15000 of dividends but it only distributed $12000 leaving $3000 at retained trust income. (Perhaps rather than a requirement of $1/k it might help to think of the trustee having discretion to distribution whatever the trustee chooses and trustee chooses $1k/month this year.)

The way to think about it (assuming the trust is not a partial grantor trust) is that the trust pays tax on all of it's income, but it gets a deduction for income distributed to beneficiaries. (This is oversimplifying. There are nuances and exceptions.) The deduction of the income distribution deduction. See 1041 Schedule B. This deduction cannot exceed "DNI" (distributable net income). Any income so deductible is attributed to the beneficiary via a K-1 and reported on the beneficiary's k-1.

[Bozodclown]

What had screwed me up was, during the Turbotax interview process I had chosen to distribute all capital gains and then later switched to the trust retaining the gains.  Turbotax didn't make the corresponding change on the Schedule D.  Once I realized that and corrected it, all of the rest of the numbers seemed to make sense.  Thanks for your response.