Trust and capital gain allocations to K-1's

[tinertim]

A couple of capital gain question for trust accounting:

1.  Is there a way in TurboTax to distribute capital gains to K-1's in an unequal manner?  Today, I see capital gains being distributed based upon a beneficiaries distribution income percentage of the total distribution income.  I do not want to use those percentages...they are close to equal.  But the reality is that 3 of the beneficiaries sold stock to get cash and 1 just transferred stock.  So the three should be allocated the capital gains and the other should have zero.  But TurboTax gives no way, that I can see, to not use those percentages and just be able to say how much capital gains each beneficiary should have.  For example...assume capital gains is $6k.  And assume we all got the same distribution amount meaning our percentages are 25%.  Each beneficiary will see $1500 on their K-1.  However, we really need to see $2k on three of the K-1's and zero on the other.  But there is no way to do this allocation in Turbotax that I can see.   Any thoughts anyone?

2.  Another question...capital gains are added to other incomes to give a total income on the 1041, line 9.  Deductions are then taken out to give adjusted total income.  That is used to derive distributable income using Schedule B.  And that adjusted figure has capital gains in it.  In schedule B, capital gains are shown and then subtracted giving the final distributable income which is pretty much equal to adjust total income.  But again, this distributable income contains capital gains in it.   Yet, capital gains comes over on the k-1 as its own line item which is added to the distributed income on the k-1.  It seems to me that the capital gain amount is then represented twice on the K-1...in the distribution amount and as its own line item.   That seems very wrong.  What am I missing here?   

Simple example:  Let's assume $10 cap gain and $10 other incomes on the 1041.  Total income would be $20.  Let's assume no deductions.   Schedule B then shows $20 as distributable income.  If all income is distributed to 2 beneficiaries, they would see $5 of capital gains and $10 of distributed income on their K-1.  That adds up to $15 of taxable income on their K-1.  But, they were only distributed $10 and should only be taxed for $10.   It just feels like capital gains are represented twice...in distribution amount and as true capital gains.  It feels wrong to me.

Any insight would be appreciated.  Thanks so much.

[M-MTax]

A couple of capital gain question for trust accounting:

It appears as if your questions may have less to do with trust accounting and more to do with the operation of the software. For that you should contact Turbotax customer service.

Re trust accounting, however, you should be advised that trying to allocate certain types of income to certain beneficiaries is not typically proper and not in accordance with the rules and regulations. For example, if there are two beneficiaries, allocating all of the capital gain to one and all of the interest income to the other is incorrect and improper. 

It may very well be a combination of the program not being capable of handling your exact scenario and an attempt to allocate income not in accordance with generally accepted rules and the tax code and regulations.

Again, you should contact customer service for program functionality, and you might want discuss your scenario with a local tax professional who can review the terms of the trust.

[tinertim]

Thank you for all your replies.  I just spent 2 hours with TurboTax Support trying to figure out how I can allocate capital gains manually across the K-1's.  The system wants to always use a percentage of gain distribution to distribute capital gains across all the K-1's.  But get this, I asked a simple question to the support agent...'Does TurboTax Business software have a screen (if I enter the correct data) that allows me to manually distribute capital gains?'.  The support agent went away as he had done over the course of 2 hours.  But this time, the viewing capability we had running so he could see my screens closed and then he hung up the phone call.  Wow...I was amazed.  All they had to do was give me a yes or no answer.  They obviously could not.

I would never use TurbaTax Business software again to do this work.  As most software, bugs can exist or capabilities not put into the software.  But you'd think they would own it.  Says a lot about Intuit and its support...and eventually the products they sell.  As you can tell, I'm pretty disgruntled.

I'll just go ahead and file grossing up the distribution amounts of my siblings and grossing down mine to compensate the capital gains being shown on my K-1.  It's not correct reporting but the software leaves me no choice.  But I think it is fairly fair for me and my siblings.

Again...thanks so much for your input!