Simple Trust / Complex Trust

[mcbreck]

I've been doing some reading and this pdf came up:

http://daviswillms.com/yahoo_site_admin/assets/docs/ten_things_davis_willms_2018_updated.28475652.pdf

Here is the IRS code he links to that I'm getting at 652(a) so you don't actually have a click on it:

Subject to subsection (b), the amount of income for the taxable year required to be distributed currently by a trust described in section 651 shall be included in the gross income of the beneficiaries to whom the income is required to be distributed, whether distributed or not.

There was a discussion last year that you can only deduct on the 1041 the income actually distributed and that is completely false. Per this attorney on a Simple Trust the 65 days to pay it out isn't applicable as they do not actually have had to pay it out to take the distribution deduction. The 65 day rule only applies to Complex Trusts and Estates.

 

I just found this interesting as I've had attorney's and CPAs argue this isn't true. Several years ago I had an attorney freak out that I was taking a deduction on money he hadn't actually distributed.

[DANRVAN]

20 hours ago, mcbreck said:

. Several years ago I had an attorney freak out that I was taking a deduction on money he hadn't actually distributed.

For a trust that was not making required distributions?  Without knowing the details, sounds like a potential breach of fiduciary duty.  Beneficiaries paying tax on money not received?  

 

20 hours ago, mcbreck said:

The 65 day rule only applies to Complex Trusts and Estates.

 

For a simple trust, earnings can be distributed within a reasonable period after the end of the year.  Reg 1.651(a) uses the example of paying out 4th quarter earnings within 15 days of the year end.

[mcbreck]

Whether there is a fiduciary duty to distribute the income isn't my responsibility. The point is that I don't have a liability and don't need to verify that the administrator distributed the income in a timely manner on a simple trust to claim the DNI deduction.