My client set up a new Irrevocable non-grantor trust. The trustee is authorized to pay or apply as much of the net income and/or principal to or for the benefit of the beneficiary as the trustee shall determine.
The trust holds investments and in 2022, the investments had approx. 3500 in dividends and $2000 in tax-exempt income. The income was not distributed.
Can anyone explain to me why the income still flows through to the beneficiary's Schedule K-1? I have the trust set up as a complex trust, and the income to be distributed is 100% discretionary. I am not reporting distributions.
Sch B, Line 9, income required to be distributed, correctly shows zero.
Sch B, Line 10, other amounts paid, credited, or otherwise required to be distributed - reports all investment income (dividends and tax-exempt interest).
Sch B, line 15, Income distribution deduction. The amount in this line is the dividend income amount.
Is my tax software, Ultra Tax, correct in the reporting? I expected the trust would be taxed on the income because it was not distributed.
Any feedback would be greatly appreciated.
The trust holds investments and in 2022, the investments had approx. 3500 in dividends and $2000 in tax-exempt income. The income was not distributed.
Can anyone explain to me why the income still flows through to the beneficiary's Schedule K-1? I have the trust set up as a complex trust, and the income to be distributed is 100% discretionary. I am not reporting distributions.
Sch B, Line 9, income required to be distributed, correctly shows zero.
Sch B, Line 10, other amounts paid, credited, or otherwise required to be distributed - reports all investment income (dividends and tax-exempt interest).
Sch B, line 15, Income distribution deduction. The amount in this line is the dividend income amount.
Is my tax software, Ultra Tax, correct in the reporting? I expected the trust would be taxed on the income because it was not distributed.
Any feedback would be greatly appreciated.
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