Question
K-1s and State Source Income
I have a client with a K-1 from a partnership. The partner is actually a family trust. The trust has never filed a tax return and the client has been treating the K-1s from the partnership as hers on her personal returns. This year there is a large capital gain. Should the trust have been filing a return and issuing a K-1 to the client as the trust's beneficiary? Does the trust create Arizona source income (the trust was created in Arizona and the trustee lives there) for this client who lives in another state?
