Trust 1041 - k-1 distribution forms
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Level 2

Trust 1041 - k-1 distribution forms

K-1 forms- for a decedent estate when income is negligible but proceeds from sale of home are disbursed, under which number is this disbursement entered? As of now, the TT business and Estate product for the State of CA appears to include the disbursement as a number which appears to include the proceeds of the sale, not excluding mortgage payoff under 14 d. The disbursements are greater than the actual disbursement amount . 

Also, if different beneficiaries received specific assets would a loss from the sale of the house (cost of sale basically) still be distributed evenly between all  beneficiaries, even though some were left interest in other possessions but not the house? That is how the loss was distributed on the K-1 form.

5 Replies
Level 15

Trust 1041 - k-1 distribution forms

First the mortgage payoff is immaterial to an income tax return ... what is going to be reported is the sale itself which will include the stepped up basis as of the date of death + the cost of sale... subtract that total from the sales price and you will probably have a loss to pass to the beneficiaries. This return may be way too complex for you to attempt on your own if they are various income items that need proration. Distribution of the assets are not reported on the income tax return for the trust. Seek professional guidance ... the cost of help should be paid by the trust.

As to the other assets ... they are not reported on an income tax return so they have nothing to do with the usage of the loss UNLESS they sell what they inherited for a gain ( assets like a car or stocks).
Level 2

Trust 1041 - k-1 distribution forms

There are no items to prorate to speak of besides the house. Primarily my concern is prorating the loss from the sale of the house on state forms ( the proceeds reported under 14d ) should be between the beneficiaries with interest in the house to my way of thinking while the program prorated between several additional minor beneficiaries.

Thank you. I appreciate your response.

Level 2

Trust 1041 - k-1 distribution forms

Thanks for clarifying. My question pertained to the K-1 forms and I think the answer is to override the inputs TT calculated based on the percentages of actual distributions and enter actual disbursements to the beneficiaries of other specific assets (not from the sale of the house), and prorate the proceeds of the house between beneficiaries receiving disbursements from that sale on line 14 d.

Level 15

Trust 1041 - k-1 distribution forms

I believe you are correct, from the limited facts presented in your response, but you should definitely seek professional tax guidance, particularly if there are contingent (remainder), beneficiaries who are minors.

 

Otherwise, the loss would most likely be allocated equally among the current beneficiaries.

Level 2

Trust 1041 - k-1 distribution forms

I am awaiting response from a tax pro. Thanks.

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