k-1 when principal only distributions

Forum|Forum|2 years ago
March 24, 2024
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Why is a k-1 produced if a Trust paid principal only, NO DNI? The Trust is a complex trust which the Trustee has flexibility with no required payouts. The Trust plans on paying all the taxes with multiple beneficiaries of differing amounts. Some withdrew most of their money.

Level2 distributions show no where on the K-1's so why even reported?

Thank you.

Best answer by Anonymous_

@maglib wrote:
1. If the TRUST agreement allows for funeral expenses to be paid, they still won't be expenses for tax purposes, am I correct on that?

Yes, you are correct; funeral expenses are not deductible on a 1041 (only on a 706 for estate tax).

See https://www.irs.gov/instructions/i1041#en_US_2023_publink100077445

@maglib wrote:
2. I had lawyers fees for getting all the assets, filing all the papers to obtain the trust assets. Lots of meetings with family to get paperwork signed. Are these expenses of the Trust for tax purposes?

Those legal fees should be deductible as expenses directly related to the administration of the trust.

RobertB4444

K-1s are generated even if they are nothing but zeroes, It is a reporting requirement.

@maglib

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maglibAuthor

Employee

@RobertB4444 Since the Trust has a loss as it's the first year and there is no DNI, the k-1's are all $0. If a beneficiary already filed their taxes as no k-1 was yet done, would it matter since 0's?

One of the beneficiaries was divorced prior to being a TRUST beneficiary. They are still filing MFJ for 2023. Would he have to still report a k-1 with 0's as he prefers not to acknowledge it to her if he doesn't need to.

Another questions:

1. If the TRUST agreement allows for funeral expenses to be paid, they still won't be expenses for tax purposes, am I correct on that?

2. I had lawyers fees for getting all the assets, filing all the papers to obtain the trust assets. Lots of meetings with family to get paperwork signed. Are these expenses of the Trust for tax purposes?

3. As home sat with nobody in it and it was an investment upon Trust obtaining it, there were numerous costs of cleaning out, lawn maintenance. I read differing rulings on these costs as being costs to maintain assets. Thoughts on being other expenses?

THanks.