Question

1041 Income reporting error in a filed return. But unable to "Update" to zero in 1099-B area of Income when attempting amended return. How do I fix this?

Forum|Forum|5 years ago
February 21, 2021
2 replies
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1099-DIV from American Funds indicates "capital gain" in a trust but no distribution and no 1099-B issued.

TurboTax Online

Review your setup options. Normally, capital gain income for a simple or complex trust is taxed at the Trust level and is not distributed out to beneficiaries. Capital gain dividends from a mutual fund would be taxed as trust income on the 1041 with the trust paying any tax based on the capital gains rate. It sounds like you are trying to force the program to distribute out these dividends and that would not be correct, unless it is a grantor trust then all the income and expenses of the trust would be reported by the grantor on their individual tax return.

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taxdadvtAuthor

To SamS1: Perhaps I am confused by the terminology. My 1099-DIV from American Funds reports both Dividends & Capital Gains.

Are you saying I should list the Capital Gains as Dividends?

Or was I correct in entering gains in the area under Investment Income? (which suggests reports will be found on 1099-B and under Stocks, Mutual Funds "Learn More" it states: "Use this topic to enter stock sale transactions reported on a broker statement or a 1099-B received from a broker.)

The Trust has received only ONE 1099-B--in a year when distributions were made.

S

sls50211

What I was referring to is the Trust should pay the tax on the capital gains dividends as they will flow to the 1041 Sch D (Line 13) and then to line 4 of the 1041. This amount would be taxed by the trust and not flow out to the beneficiary on the K1. The Ordinary dividends would be reported on line 2a and this income would flow out to the beneficiaries, net of any fiduciary fees, attorney costs, or accounting fees. Example: 1099 Div has $100 ordinary dividends and $300 capital gains dividends and there are $50 of trustee fees. The K1 would reflect $50 of dividend income flowing out to the beneficiary ($100-$50) and the trust 1041 would pay the tax on the $300 of capital gains dividends (less the $100 trust exemption).

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taxdadvtAuthor

To SamS1:

From taxdadvt:

Got it! Thanks for clarification. I will not need to file an amended 1041.

These are Crummy Trusts for my children funded by a gift from their grandmother at the end of her life. Turbotax has been very effective at reducing the cost of tax preparation compared to CPA fees.