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Discussion Forum Index --> Tax Questions --> Beneficiary trust earnings taxable?
MLG (talk|edits) said:
| 2007 April 8
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| Have a new young client who brought me 2 Final Trust K-1s. K-1s identify her as "beneficiary". The capital gains are $25k and small amount of dividends. I assumed the CG and income reported on these K-1s are taxable to her - so she has some tax liability. She said her brother, with similar K-1s, had his return prepared by someone else who only reported the dividends - no large tax liability. If the dividends are taxable, why not the CG? What's the REAL deal? Am I wrong? Do I need more information about the trust and/or inheritance?
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Riley2 (talk|edits) said:
| 8 April 2007
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| The real question is whether the capital gains are really part of DNI. This question can only be answered by the preparer of the Form 1041 or by someone who has reviewed the trust instrument. If the capital gains are not part of DNI, the capital gains taxes should have been paid by the trust. I admit that it is unusual to see capital gains included as part of DNI, but it is possible.
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MLG (talk|edits) said:
| 2007 April 8
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| The CG would have been distributed (Final K-1) along with the dividends. Isn't all part of the money distributed from the trust? Granted, the taxes could have been paid by the trust, but the CG would have been distributed.
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Kevinh5 (talk|edits) said:
| 8 April 2007
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| Ask to see the brother's K-1 and return - it is probably wrong.
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Dennis (talk|edits) said:
| 8 April 2007
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| Come on guys. The post did say final, and I just did one where the triggering event caused similar results (one turned twenty five and the other graduated from college). The will specifically set up seperate shares. It's always nice for the beneficiaries to know what's going, though.
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