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Level 2
February 13, 2026
Question

complex trust final return

  • February 13, 2026
  • 3 replies
  • 12 views

I am trying to file a final return after the sale of property.  Proceeds are to go to 8 different individuals according to trust documents.  Trust pays all taxes due to beneficiaries not have money to do so and family fighting  Any way to file without putting in distribution percentages and beneficiary info?  If i put 

3 replies

IRonMaN
Level 15
February 13, 2026

If the beneficiaries don’t have any cash to pay tax on the final return, where is the trust going to get cash to pay the tax?

Slava Ukraini!
beckycpa1Author
Level 2
February 13, 2026

The trust has the cash and is going to pay the taxes and then distribute the remaining funds to the beneficiaries according to the trust doc percentages.  All the beneficiaries fight - so it was requested the trust takes care of all the taxes until the property is sold and the remainder gets distributed.  

Level 10
February 13, 2026

I also would like to know the timeline of events.

BobKamman
Level 15
February 13, 2026

If the trust has distributable income, it gets distributed to the beneficiaries on the final return.  You don't tell us any dates, so it's difficult to figure out what's going on here.  The property was sold in 2025, but the money has not yet been distributed?  Then there are no K-1s and the percentages don't matter.  Or were there distributions in 2025?  Not from the property sale, but from other assets?  

beckycpa1Author
Level 2
February 13, 2026

Property sold in 2025. Long term capital gain of over 300k. Only thing left is money in the bank account.  Trustee was waiting to figure taxes to pay on 2025 return so that once those are paid the funds could be distributed.  If I don’t put in beneficiary info lacerte gives me an error message because it is a final return. When I put the beneficiaries into the return with their percentages lacerte applies the capital gain amount to the k-1s according to their percentages rather than calculating it to the trust.  If I don’t put in beneficiary info it calculates for the trust.  Thinking if I want the trust to pay the taxes I need to make the 2026 return final.  Hope this is clearer to understand!!  Any suggestions?? May go back to trustee and explain option of letting capital gains flow to beneficiaries.  Their distribution would be larger and they could pay taxes individually.  

sjrcpa
Level 15
February 13, 2026

Everything flows to the beneficiaries on a final return.

But since there seems to be a few hundred thousand dollars in the trust, is it earning anything? 2025 may not be final.

The more I know the more I don’t know.
Drphibes
Level 6
February 14, 2026

Have had this situation more than once.  I tell the Trustee to not close the Trust, keep a chunk of money in a Trust bank account (especially if the beneficiaries are fighting, may need it for attorney fees defending the Trust), pay the tax at the Trust level (probably way higher than at the beneficiary level, but hey), file the 2025 returns, then next tax season file a final 2026 set of returns with hopefully no income or where the income is wiped out by Trust expenses. 

BobKamman
Level 15
February 14, 2026

@Drphibes  "pay the tax at the Trust level (probably way higher than at the beneficiary level, but hey)"

I always have to think that through, when as in this case most or all of the income is LTCG.  If the beneficiaries are in a lower bracket where they can absorb some tax-free and more at lower brackets, then IRS wins.  But in many cases, the beneficiaries pay on LTCG at the same rate as the trust, and the spike in income might disqualify them from other benefits or increase their Medicare premiums.  

This case, it sounds like some of the K-1s are being mailed to a trailer park, and the less money is distributed the less fentanyl might be crossing the border.