Form 1041

[Pammy]

I am preparing a 1041 for a simple trust.  They received funds from a brokerage account that was distributed to the beneficiaries.  The funds have already been accounted for in a previous year by a prior preparer.  How do I account for the funds and the distribution?  Help!!!

Pam Whitacre

Tax Professional

[Ringers]

If the "funds" that you describe are the dividends that were deposited into the Trust checking account last year and the dividends or interest which produced these "funds" were reported on last year's Trust as income, then there is no need to report either the "funds" themselves or the distribution of them on the Trust return at all.  Similarly for the proceeds from the sale of a capital asset, as long as the capital gain or loss was accounted for on last year"s return.  

In many ways a simple Trust is not much different from the thought process behind an individual tax return; in fact, it usually is just a stand in for what would have been on the decedent's return if he had not died.

If you received dividend checks from a stock or bank interest in 2019 and put it into the bank, you paid tax on the dividends or interest on your 2019 return.  But when your bank account"distributes" the funds to you in 2020 by means of a withdrawal, you are not going to put that "distribution" of funds on your personal return--are you?