Discussion:1041 Trust Short term Capital Gain Distributions
From TaxAlmanac, A Free Online Resource
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.
From TaxAlmanac
Discussion Forum Index --> Advanced Tax Questions --> 1041 Trust Short term Capital Gain Distributions
Discussion Forum Index --> Tax Questions --> 1041 Trust Short term Capital Gain Distributions
| 5 February 2008 | |
| I’m in Florida (no state tax) so this is for federal 1041. The trust only has interest, dividends and capital gain distributions (short and long term).
Net income is to be paid to one beneficiary. Income is comprised of interest and dividends since capital gain distributions (short or long term) are not considered income. With the change several years ago in tax rates on capital gains the 1099-divs lump short term capital gain distributions and dividends together in block 1a as ordinary dividends. How do you break out the short term capital gain distributions so they are not distributed to the beneficiary? | |
| 5 February 2008 | |
| Hi you dont 1099s have always included the STCG in with the dividends bye | |
| 5 February 2008 | |
| fiduciary accounting income - based on what the trust document says in principal vs income? | |
| 5 February 2008 | |
| Hi I will bet the document doesnt define STCG which generally is income especially on a 1099 from a mutual fund.bye | |
| 5 February 2008 | |
| Still, you need to know what the trust document says about items of income and principal first. | |
| 5 February 2008 | |
| Your software should let you limit the amount that is actually distributed on the K-1 to the beneficiary. But do you really need to do that? Read your documents first. If that doesn't settle it, look to state law. If your state follows the model Principal & Income Act it typically gives the trustee some discretion to determine what is Income and what is Principal. Short-term trading gains, which are included in Ordinary Dividends on the 1099, are not all that different from interest or even business income, and the trustee may decide to treat that as Income. This doesn't come at the expense of, or result in loss to the Principal beneficiary, who is entitled to the underlying asset and long-term appreciation. If one were to NOT make this determination, then the Income beneficiary might have a gripe that the trustee should do more to balance the returns for both types of beneficiaries. | |
To join in on this discussion, you must first
log in.
