Trust.....

[BOB W]

.... was created upon the death of a father. It has rental property and investments. The trust was set up to be a complex trust> no distributions. Son is now 18 and in college. The trust is allowed to make distribution to cover certain expenses.

Questions> Are any of those distributions subject to income to the (only) beneficiary?
Where does DNI fit in?
Can I take a distribution deduction to reduce trust taxes?

As you see, this is not my fortee'.

[Bees Knees]

In a complex trust, distributions are discretionary distributions. TTB page 21-14 discusses how to calculate distributable net income, and page 21-15 shows that any discretionary distributions are reported on line 10 of Schedule B. Thus, if a distribution is actually made to a beneficiary of a complex trust, the beneficiary must pay tax on the income distributed and the trust takes a deduction for distributed income. TTB also says that an estate or trust cannot elect to pay tax on amounts taxable to the beneficiaries.

[BOB W]

In a complex trust, distributions are discretionary distributions. TTB page 21-14 discusses how to calculate distributable net income, and page 21-15 shows that any discretionary distributions are reported on line 10 of Schedule B. Thus, if a distribution is actually made to a beneficiary of a complex trust, the beneficiary must pay tax on the income distributed and the trust takes a deduction for distributed income. TTB also says that an estate or trust cannot elect to pay tax on amounts taxable to the beneficiaries.

Thanks Bees> for the research and, as usual, the great answer........

[George Boutwell]

Polysyllabic

I think this is a situation where you have an accumulation distribution, and Schedule J is involved and probably Form 4970 for the kid. Take a look at those and see if they apply. I had one a long time ago. The kids who got the money grew up and now they have kids old enough to file returns themselves. So I don't recall the details.

[BOB W]

I think this is a situation where you have an accumulation distribution, and Schedule J is involved and probably Form 4970 for the kid. Take a look at those and see if they apply. I had one a long time ago. The kids who got the money grew up and now they have kids old enough to file returns themselves. So I don't recall the details.

Thanks George, I'll look into it as well.....

[natiro]

Trust

Per IRC 665(c)(1), unless the trust is one of the following, the throwback rules would not apply:

1. a foreign trust;
2. a U.S. trust that at any time was a foreign trust; and
3. a trust created before March 1, 1984, that would be treated as a multiple trust under IRC Sec. 643(f)

[BOB W]

Per IRC 665(c)(1), unless the trust is one of the following, the throwback rules would not apply:

1. a foreign trust;
2. a U.S. trust that at any time was a foreign trust; and
3. a trust created before March 1, 1984, that would be treated as a multiple trust under IRC Sec. 643(f)

Thanks Nitro, saved the trouble of looking it up..................

[JCH]

.... was created upon the death of a father. It has rental property and investments. The trust was set up to be a complex trust> no distributions. Son is now 18 and in college. The trust is allowed to make distribution to cover certain expenses.

Questions> Are any of those distributions subject to income to the (only) beneficiary?
Where does DNI fit in?
Can I take a distribution deduction to reduce trust taxes?

As you see, this is not my fortee'.

Do you have a copy of the trust instrument? What does it say about discretionary distributions? Who is the trustee?

[BOB W]

Do you have a copy of the trust instrument? What does it say about discretionary distributions? Who is the trustee?

What does it say about discretionary distributions? "Nothing", other than it is allowed for various expenses.....

[JCH]

Bob, I don't want to misrepresent myself as an expert on trusts, but it seems that the trustee could decide on the amounts and types of discretionary distributions. Have you checked with him/her?

[BOB W]

Bob, I don't want to misrepresent myself as an expert on trusts, but it seems that the trustee could decide on the amounts and types of discretionary distributions. Have you checked with him/her?

Distributions were made to the tune of $10,000 +. $8,000 was for college plus other general expenses. Total net income on the 1041 was $47,000+.

All expenses were issued by the trustee.

[JCH]

Distributions were made to the tune of $10,000 +. $8,000 was for college plus other general expenses. Total net income on the 1041 was $47,000+.

All expenses were issued by the trustee.

Discretionary distribution go to line 10 of Schedule B, and the total flows to the face of the 1041. Yes, they would reduce the income tax to the trust.

[BOB W]

Now.....

...... Now once I figure the DNI, how is the various sources allocated? There is Interest, Dividend, Rental Income, and Capital Gaines.

[OldJack]

Well... isn't there a difference in distributions of principle and distributions of income?

[BOB W]

Trust

Thank you all for your input. Because of your input I was able to search my CS program and found that ALL the calculations necessay were being done and I just had to input the DNI bottom line deduction and assign it to the beneficiary, I chose interest. DNI was $40.
The balance was from corpus, I guess.