Form 1041 Distributions

[calamityj]

I have a 1041 for a complex trust that does NOT require income distribution.  How can I stop the income from flowing to the K-1.

[BobKamman]

But were there any distributions?  Youi can stop money from flowing to beneficiaries but once that's done, you can't stop it from showing up on the Schedules K-1.

[calamityj]

Thank you, Bob.  

It is a complex non grantor trust that doesn't require distributions to beneficiaries.  There was a cash distribution, allowed per the trust, but the income doesn't flow through to the beneficiaries.  The trust needs to pay the taxes on the income (interest and dividends). 

[BobKamman]

In a perfect world that may be how it should work.  But we all must follow the Internal Revenue Code.  

Good luck telling the beneficiaries they will have to file amended returns.  

[calamityj]

This is a non grantor, irrevocable trust.  Does that change your answer?

First return filed for the trust.

[BobKamman]

No, it doesn't change the answer.  And if it's a calendar-year return for 2021, you do realize it's already late even if an extension was requested?  

[Accountant-Man · Accepted solution]

Either do not enter beneficiary information or enter zero as ownership percentages.

[BobKamman]

@Accountant-Man And then do you recommend crossing out "under penalty of perjury" before signing it as preparer?

[Accountant-Man]

If the only distributions are from principal, then you don't need K-1s.

[BobKamman]

Wrong.  If you want to cheat, you can ignore the instructions for Line 10 of Form 1041:

Line 10 is to be completed only by a decedent's estate or complex trust. These distributions consist of any other amounts paid, credited, or required to be distributed and are referred to as second tier distributions. Such amounts include annuities to the extent not paid out of income, mandatory and discretionary distributions of corpus, and distributions of property in kind.