trust interest and rental income distributions

[no-name1]

I'm preparing a 1041 for a trust in TT business and confused.  Total income is 10,325  (10324 in rental real estate income and $1 interest) income.  Three beneficiaries.  I was using the K1 figures for the final distribution amounts made by the 65 day deadline and have now realized distributions were $1 (the interest) less than they should have been.  Are you just supposed to remember to add the interest to any other income and THEN make the final distribution? It seems to me the software ought to make this clearer.  The K1 worksheet doesn't provide a TOTAL for each beneficiary of all income.

I have no idea what to do with the $1.00.  Does it just stays as corpus in the checking account?  Or add it to the next year (2022) distributions?

[Anonymous_]

It is only $1 so that would hardly be worth being concerned with in terms of whether or not it should be distributed (if there are three beneficiaries, it would not even round up to $1 on their K-1s).

Further, a trust that is not required to distribute all income currently (per the Code), still gets a $100 exemption which will more than absorb the $1.

[no-name1]

Thanks very much.  I've never quite understood the 100 exemption. or strategy to take advantage of it.  Theoretically can you distributed100 less than the income each year and reinvest that money?  It's not much, but the beneficiaries are young and that would add up over time.  

[Anonymous_]

The exemption has not been updated or indexed for inflation in just about forever.

It is basically there to catch small amounts of undistributed gain (which normally stays with the trust) and income that will remain with the trust (corpus).