Trust K-1 Distributions

Forum|Forum|2 years ago
February 4, 2024
6 replies
44 views

In a trust's federal and state DNI K-1 worksheets the interest income and capital gains being distributed are shown in their own boxes but in the K-1 worksheet and each beneficiaries K-1, income and capital gains are combined in the long term capital gains box. I don't seem to be able to edit the K-1 worksheet to show the separate types of distributions. Why doesn't the K-1 worksheet show the different income types like the DNI worksheet? How do I fix this?

TurboTax Business Windows

BozodclownAuthor

Level 2

I see that the interest income is subtracted from the deductions on the DNI worksheet. The excess deductions are then subtracted from the capital gains number. Is this right? The deductions are applied to the ordinary income first and then the excess deductions applied to the capital gains? I guess I should've studied trust taxation in school.

Anonymous_

Level 15

First of all, long-term capital gains and interest income are taxed differently on the federal level.

More importantly, capital gains are typically (by default) considered to be corpus and remain with the trust (i.e., are taxable for the trust and not distributed to the beneficiaries, at least not until the final return is filed or the trust directs otherwise).

BozodclownAuthor

Level 2

Right. Interest income and capital gains are taxed differently. That's why I'm concerned. The K-1s show the distributions as long term capital gains but the reality is a small amount of that was ordinary income. Turbotax applied the deductions to the interest income first in the DNI worksheet and then eliminated it from the distribution. This IS the final trust return and so capital gains can be distributed to beneficiaries. That's my understanding anyway.