Our trust is a complex trust which I have been named the trustee. The trust made a distribution of $545,000 divided equally between the three beneficiaries of the trust. The $545,000 came from the sale of a home that was inherited from the decedent. Because the home was inherited, the beneficiaries will not be taxed for their share of the asset. The home was sold for the same amount that the property was appraised for at the time of the decedent's passing, so there were no capital gains to be taxed either. $16,871 was earned in 2017 from an out-of-state income property held by the trust; however, no distribution was made in 2017 for the income. When asked "Did the Trust Make Any Distributions to Its Beneficiaries in 2017?", do I answer "Yes" or "No"? If I answer "Yes", I am presented with the question and note, "Was All the Trust's Income Distributed? The trust's accounting income this year is $7,587. We just need to know if the trust actually distributed this amount to its beneficiaries." Do I answer "Yes" or "No"? If I answer "No, it distributed a different amount", I am presented with two fields for Amount Distributed, "Required Amount (First Tier)" and "Other Amount (Second Tier)". If I am to answer "No" to the last question, what am I supposed to enter into the two fields?
The short answer to the question posited is simply distributions to beneficiaries in the same tax year carry through DNI (distributable net income) earned during the year whether that is the intent or not.