Payment of principal from complex trust

Forum|Forum|2 years ago
January 31, 2024
2 replies
11 views

Hi all

I am distributing principal of $15k from a trust to the beneficiary.

1. Client argues its below gift threshold and not taxable to bene. I disagree, distributions are taxable unless they are a return of principal. Thoughts?

2. Trying to enter the principal distribution in the trusts K1. Have entered into line 10 of Schedule B of the K1 (amount to be distributed) and then Proseries guides in the help tab to override the blank box 12 and re-enter the amount as ta-exempt income above. Seems a bit clunky - any other recommendations as to how to enter a distribution of principal in a trust.

Any help appreciated

Nolan

ProSeries Professional

This topic has been closed for replies.

D

Dusty2

Level 6

.

sjrcpa

Level 15

1. It's not a gift. The initial transfer to the trust by the settlor was a gift to the beneficiary(ies).

2. Income tax wise, a distribution is only taxable and will only appear on the K-1 to the extent of Distributable Net Income of the trust. The income distribution deduction is calculated on page 2 of the 1041.

The more I know the more I don’t know.

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