1) STCG $22 2) LTCG (stock) $7581 3) LTCL (real property) -$7,626.What amount do I enter on Form 1041 schedule B, line 3? Are losses passes to K-1 beneficiaries?

[Accountant-Man]

Have you ever prepared a 1041 before this one?

[lloyd808]

Yes but those involve only interest and dividends. This one had LTCG from stocks and LTCL on sale of real property due to stepped up basis and expenses of sale.

[lloyd808]

IRS Instructions only mentioned to enter capital gains. Not very specific nor did it provide any examples. Not sure if it meant to report NET gains/losses or just the GROSS gains. Please provide reference to any specific information from IRS.

[lloyd808]

Based on the information provided above, what amount should I enter on Form 1041 schedule B, line 3?
 

[George4Tacks]

Is this an estate or a trust? If a trust, what type of trust? Is this a final return? Were there distributions?
IRS instructions for that line have many more words than just "enter capital gains".
Include all capital gains, whether or not
distributed, that are attributable to
income under the governing instrument
or local law. For example, if the trustee
distributed 50% of the current year's
capital gains to the income beneficiaries
(and reflects this amount in column (1),
line 19 of Schedule D (Form 1041)), but
under the governing instrument all
capital gains are attributable to income,
then include 100% of the capital gains
on line 3. If the amount on Schedule D
(Form 1041), line 19, column (1), is a
net loss, enter zero.
If the exclusion of gain from the sale
or exchange of QSB stock was claimed,
don't reduce the gain on line 3 by any
amount excluded under section 1202.
i.e. What does the "governing instrument" say to do?

[lloyd808]

George, My question is centered on a specific data entry field in the Proseries program for Form 1041. The field is  after line 19 on Schedule D that asks for "all capital gains". I believe this automatically updates the amount on Form 1041; Schedule B; line 3. Not sure what to enter into this field. Should it be 1) the sum of all of the capital gains transactions ONLY or 2) "zero" (per IRS instructions you provided above) since the NET of the sum of ALL capital gains and losses resulted in a net loss of minus $23?

Additional information - 1) Not final year; 2) simple trust; 3) trust document requires all income to be distributed to beneficiaries 4) distributions were made in 2018

[Accountant-Man]

1041 Part III, page 2. You need to know the terms of the trust. USUALLY, but not always, gains are taxed at the trust level and not passed through to the beneficiaries. Losses cannot be passed through until the year of termination of the trust or estate.

Some trusts, typically complex ones, might pass out gains. Simple ones typically do not.

{Sorry, just read this post} Income to benes does not typically include gains. Gains are Corpus, not income.

[George4Tacks]

:+1:

[lloyd808]

Resending my previous question . . .  Would appreciate a response to my question which is centered on a specific data entry field in the Proseries program for Form 1041. The field is  after line 19 on Schedule D that asks for "all capital gains". I believe this automatically updates the amount on Form 1041; Schedule B; line 3. Not sure what to enter into this field. Should it be 1) the sum of all of the capital gains transactions ONLY or 2) "zero" (per IRS instructions you provided above) since the NET of the sum of ALL capital gains and losses resulted in a net loss of minus $23?

[Accountant-Man · Accepted solution]

You enter sales transactions of Schedule D and Schedule B line is automatic. Distributions and pass-throughs to beneficiaries can be different, and need more info, like George asks.