Where on 1041 to report the payout of principal (corpus) to the beneficiaries.

[BMAbrahams]

Issue:

Complex trust.  Fixed required distribution which is > income produced.

Trustee has full flexibility on retaining income, etc., only requirement is the fixed distiribution.

This is sample numbers and problems.

Income earned $25,596 DNI

Charitable $250

Fixed 70k distributed to 2 beneficiaries equally.

Trust 10% tax rate maximized so trust DOES NOT distribute $2,750 of income and pays low 10% tax rate

Income distributed 22,746 ($25,596 - $100 exemption - $2,750 retained income)

There seems to be no way to input, manually or otherwise, to show:

Corpus nontaxable distribution of the additional $47,254 ($70,000 - taxable k1 distributed of 22,746)

Tier 1 is $0 since no income is required to be distributed.

Tier 2 is $22746

Schedule B line 9 is required income distribution = $0 (no income is REQUIRED to be distributed)

Schedule B line 10 is Other Amounts Paid, Credited, or Otherwise Required To Be Distributed = I can't put in the $47,254 because it adds it to income distribution and I don't see where to offset it.  Plus if I try it, Turbo

then doesn't allow the trust to retain $2,750 of income so trust pays 10%....it distributes all income to beneficiaries.

What am I missing?

Thanks

[Anonymous_ · Accepted solution]

You do not have to report distributions of corpus.

In this instance, if you do, in fact, show a distribution, then that distribution will carry out DNI.