TAXMAN Posted March 16, 2023 Report Posted March 16, 2023 If trust sold stock to make distribution to the heir, Can I allocate the gain to the heir and the trust not pay the tax? Quote
Margaret CPA in OH Posted March 16, 2023 Report Posted March 16, 2023 What does the trust document say? What has the trustee opted to do? There is an election and statement to be included. I'll look it up and get back to you. 1 Quote
Margaret CPA in OH Posted March 16, 2023 Report Posted March 16, 2023 Pursuant to Reg. 1.643(A)(B), trustee is making a regular practice of distributing capital gains to the beneficiary as trust instrument permits. I was trustee for several trust and did this for the life of the trusts. Quote
TAXMAN Posted March 17, 2023 Author Report Posted March 17, 2023 In reading trust document it says 1/10 of original principle and the annual income to be paid to the heir. Therefore I think the capital gain income belongs to the heir. It appears that Margaret CPA has basically said the same thing. Quote
BulldogTom Posted March 17, 2023 Report Posted March 17, 2023 53 minutes ago, TAXMAN said: In reading trust document it says 1/10 of original principle and the annual income to be paid to the heir. Therefore I think the capital gain income belongs to the heir. It appears that Margaret CPA has basically said the same thing. It is a little more nuanced than that. The trust instrument should define income. If the instrument does not, then the rules fall back to state law for computing income. Most states define Capital Gains as corpus. Most trust instruments allow the trustee to distribute corpus for various reasons, or in your case, require 10% of the corpus to be distributed. What the IRS is looking for (IMHO) is distributions of CG to low income beneficiaries to escape trust taxation. I believe that so long as you have a viable reason for the distribution of CG, that is NOT lowering tax, and is within the authority of the trust instrument, you are in good shape. Margaret always distributes, so again, no issues with the service because it is a uniform application. If Margaret was distributing CG to low income beneficiaries and other income to high income beneficiaries, then she might have a problem with the service. Tom Longview, TX 2 Quote
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