Every year my client takes a distribution of the Dividends earned from the corpus of her Charitable Remainder Trust. In 2013 she gave the amount earned to a Charitable Organization. This year (2014) she transferred it to her Living Trust. Are either of these distributions taxable to her?
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possibly and yes.Originally posted by leerobea View Post -
Crat or crut distributions
If you mean distributions from a CRAT or CRUT the answer is "it depends". The trust would file Form 5227 and the bene would receive a K-1. The taxability of the distribution depends on how distribution is characterized among -- ordinary income, l/t gains, muni income or principal distributions.
You mention dividends distributed from corpus. Is this part of the calculated annuity or unitrust disribution?
Perhaps I am not understanding what type of trust you talking about.
Normally there would be a calculated amount distributed from the trust. The taxable character of the distribution is determined by the earnings and any retained gains in the trust.
Anything on the K-1 is reported on the bene's 1040. If the money is donated then there may be a charitable (itemized) deduction. If a part of the distribution is reported as a "Corpus" distribution on the K-1, that would not be taxable no matter how it is spent.
I have seen K-1's with mostly ordinary income, some with mostly capital gains (the trust was funded with highly appreciated assets) and some with mostly "corpus" being distributed.
It really goes back to the type of trust and the terms of the governing document.Comment
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