Income Distribution Deduction K1 - Small Estate

[pgwakeford]

A new client just presented me with estate information from 2019 onward.  No distributions of income (50K) have been made to the three beneficiaries. I read that the income distribution deduction on Sch B can still be claimed even if the executor has not actually made the distributions.  However, would that not generate K-1s requiring that the beneficiaries to amend their 1040 returns?  We will have the same situation for 2020-2023.

Thanks in advance.

[sjrcpa]

"I read that the income distribution deduction on Sch B can still be claimed even if the executor has not actually made the distributions."

Where'd you read that?

There is an election that can be made if distributions were paid within 65 days after year end. Not your situation.

Estate gets to pay the tax, plus interest and penalty.

[Strongsilence-CPA]

Have you read the trust document?  Do you know the state law that governs DNI and FAI?  If there is capital gains there is a different treatment.

[pgwakeford]

Thanks so much for the reply.  That's how I've prepared (unfortunately for them), however just wanting to check that I hadn't missed something. It was form the line 18 instructions.

Line 18—Income Distribution Deduction
If the estate or trust was required to distribute income
currently or if it paid, credited, or was required to distribute
any other amounts to beneficiaries during the tax year,
complete Schedule B to determine the estate's or trust's
income distribution deduction. However, if you are filing for a
pooled income fund, don't complete Schedule B. Instead,
attach a statement to support the computation of the income
distribution deduction. For more information, see Pooled
Income Funds, earlier.
If the estate or trust claims an income distribution
deduction, complete and attach:
• Part I (through line 24) and Part II of Schedule I (Form
1041) to refigure the deduction on a minimum tax basis, and
• Schedule K-1 (Form 1041) for each beneficiary to which a
distribution was made or required to be made.

[pgwakeford]

There is no trust document.  This was a small estate return ($50K in income) following death which has still not been distributed out.

[Strongsilence-CPA]

Hi PG

Is this a simple or a complex trust?   The trust document will have provisions about the requirement for distributions. 

Once that is known you can determine if beneficiaries get distributions of income and how much income is DNI