Avoid tax on 1041 since beneficiary should pay it

Forum|Forum|1 year ago
April 9, 2025
1 reply
0 views

I know that the distribution is not taxable to me, the fiduciary, but am unclear how to make my 1041 show that.

TurboTax Business Windows

dmertz

Employee

Distributable Net Income is shown on Schedule B and on the beneficiaries' Schedules K-1. The estate or trust receives a income distribution deduction calculated on line 15 of Schedule B. To be treated as DIN, you must enter the beneficiary information into TurboTax Business.

jgs1947Author

I did finally find the small question that clarifies 100% going to beneficiary. I now have a question about showing a loss on line 23. It really isn't a loss, because it is the final return for this trust with the balance being held going to the beneficiary. I find it odd that this amount is showing up as income (or a loss) since it has been held in trust for 20 years. The only part that is income is the capital gains/losses on the initial investment.

The distribution is showing up on K-1 as Net short-term capital gain which is not accurate. Did I do something wrong?

Anyway, I don't care that it shows a loss. As I said, it is the final return for this trust. I only care that the IRS accept it and that it is done correctly.

dmertz

Employee

-$600 is normal on line 23 when all income is passed through to beneficiaries. The -$600 effectively comes from subtracting income distribution deduction and the $600 exemption from the otherwise taxable income.

Not knowing anything about the type of income being passed through the beneficiary(s), I can't say whether the income is from a short-term capital gain or not.