Taxable Income and Beneficiary distributions

[DTFHS]

Can a portion or all of taxable trust income be allocated to attorney and accounting fees before distributions to beneficiaries? Say, if a revocable trust (after death of the grantor) had 100.00 in taxable income for the 2021 tax year but accounting expenses of 150.00 and had made distributions to beneficiaries in 2021, would the 100.00 in taxable income be allocated to the accounting fees resulting in no K-1 income nor taxes due the beneficiaries?  The Trust is domiciled in Virginia.

[Vanessa A]

It all depends.  If income is less than $600 and the beneficiary is not a non-resident alien, then you may not need to issue a K-1.

The distribution type may also affect whether or not the K-1's need to be issued. 

Check out this link for more information on Trusts and K-1's. 

[Anonymous_]

A nongrantor trust is required to file a 1041 if it has income of $600 or more or any taxable income for the tax year. If distributions carry through DNI, then K-1s must also be issued to the beneficiaries who receive those distributions.

Legitimate expenses incurred for services rendered to the trust can be deducted from gross income.

[DTFHS]

The Trust had very little income ($67 taxable)  but expenses of  well above that for the year (Trust Admin + Accounting + Legal etc.  The K-1's generated by Turbo Tax to the beneficiaries (4 of them) are all blank.   I have read that if the K-1's are blank then there is no point submitting them with one's taxes as it means there was no pass through of income to the beneficiaries as it was offset by expenses.  Is this accurate?  

[Anonymous_]

Yes, what you have read is accurate.

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