Principal distribution from a Trust

Forum|Forum|2 years ago
March 20, 2024
2 replies
26 views

I have a client the is the sole beneficiary of his mothers trust. For the first 5 years he received just the income from the trust. I filed 1041 for the trust and schedule K-1 for their individual return. Beginning this year (2023 return) he receives the income plus a 20,000 payment from principal. This 20,000 is taxable on their individual return. My question where do i enter this distribution from the trust in form 1041 and the k-1 so it appears on their personal 1040.

Thanks

ProSeries Professional

This topic has been closed for replies.

Best answer by dascpa

Prior answer is correct. Principal (corpus) payments from a trust are not taxable income and are not reported on a K-1. The 1041 "may" have additional reporting when your Schedule B distribution Line 10 is greater than the Line 9 required amount. Directly on the screen and the form it says on Line 11 "If greater than line 8, see instructions".

Also, you need to make sure the trust is allowed to distribute corpus. Some trust documents only allow for income distributions.

J

jeffmcpa2010

Level 10

First - I am not a trust expert even though I have prepared a few trust returns per year for several years, so I am asking to learn.

What would make a distribution from principal taxable to the beneficiary? I just haven't run across this.

dascpaAnswer

Level 11

Prior answer is correct. Principal (corpus) payments from a trust are not taxable income and are not reported on a K-1. The 1041 "may" have additional reporting when your Schedule B distribution Line 10 is greater than the Line 9 required amount. Directly on the screen and the form it says on Line 11 "If greater than line 8, see instructions".

Also, you need to make sure the trust is allowed to distribute corpus. Some trust documents only allow for income distributions.

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