Margaret CRUT Again!!!

[Terry D EA]

I am using OltPro (OneDesk)to prepare a CRUT. The software is calculating capital gains tax on part five of the Sch D. They do have a box for the beneficiary percentage and when placing 100% there it the software will populate the K-1. The 5227 is correct. I have checked previous years and section five of the Sch D is not filled out. Am I correct that this section should not be filled out because all interest, dividends, and cap gains flows to the beneficiary (the tier)? The cap gains tax is calculated on the beneficiary's 1040 from the information from the K-1 correct? OltPro is looking into this and is supposed to call me back. What is your opinion here.

Using OltPro to complete this type of return is similar to the way ATX does it. You have to use the 1041 to get the information to the 5227 and K-1.

[Margaret CPA in OH]

I have the capital gains go to the trust. Only if distributions exceed the dividend and interest income should there be cap gains that flow through to the bene. One of my CRUTs fairly often must distribute cap gains but the K-1 shows on lines 3 and 4 the amount which then, as you note, is treated as appropriate on the bene 1040.

I don't know the terms of the CRUT you are working with, but I think that typically cg and cl are kept within the trust as much as possible. Check page 3 of 5227 and you would see Line 58b even keeps track of undistributed cg.

I think the issue is that the Sch. D is for Form 1041 and you are preparing Form 5227.

I hope this helps!

[Terry D EA]

Thanks Margaret and you are correct in this case. The distributions (unitrust) exceeds the dividends and interest so the CG goes to the beneficiary. I have a copy of the trust instrument and I agree with you about the CG staying in the trust as much as possible and am aware of page 3 of the 5227. As I thought, the K-1 is connecting with the 1041 but I can't get it to stop calculating CP tax. Being this return has to be paper filed, and if I don't find any other work around, I will print the return in cute.pdf (professional) and remove the calculation from the Sch D. Your agreement does help. Thanks again!

[Margaret CPA in OH]

The only other thing I can think of is on Sch. D Part III, make sure to put the cg in column 2, trust's share, 100%. It then should flow to the beneficiary as allocated from cg when divs and interest are exhausted. In ATX is did flow there but I could also input as it is a blue field. Also, on the K-1 input, I did not enter anything to do with tiers as not applicable, just Beneficiaries percentage, in this case, 100%.

Since paper filing is required, I think you are correct to prepare it correctly whether or not you use software.

[Terry D EA]

No doubt I will go with filing it correctly by using the means I mentioned. I will look into to see if there is an input for percentage of trust's share. Thanks for giving me that bit of information.