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J
JHUMPHCPA13
Level 3
June 2, 2021

Irrevocable Trust Distribution

  • June 2, 2021
  • 1 reply
  • 7 views

I have a client who sold all the stock in his irrevocable trust and took a cash distribution.  Total long term capital gain was approx 20k and the cash distribution was 75K.  Should the distribution be reflected on the beneficiary's K1?  Gains have not previously been considered part of DNI but I don't  believe he has taken a distribution from them before.  

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    1 reply

    BobKamman
    BobKamman
    Level 15
    June 2, 2021

    Capital gains are taxed to the trust, not the beneficiary, unless allocation under state law or the trust instrument requires otherwise.  Are you sure this is not a grantor trust?  Are the grantor and trustee and beneficiary the same person?

      J
      JHUMPHCPA13Author
      Level 3
      June 2, 2021

      No, they are three different people.  The trust was established in 1995 by the beneficiary's parents.  The trustee is a separate individual.  The trust documents state it is an irrevocable trust.  The software is currently assessing the tax to the trust.  I just want to make sure as this is the first time I have had to handle this type of situation.

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