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- Why does 1041 allocate total distributions to beneficiaries income when there is a rental loss carryforward?
Why does 1041 allocate total distributions to beneficiaries income when there is a rental loss carryforward?
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david3
Level 7
04-10-2021
03:26 PM
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A complex trust only consists of rental property that has a rental loss carryforward.
The beneficiaries took distributions for $10,900. They say that there is $4,800 remaining principal balance and expect that $4,800 of the distributions will be allocated to principal.
However, the total $10,900 amount is being allocated to the beneficiaries. How do I allocate part of the $10,900 reported on 1041 sch b line 10 to corpus?
Otherwise, the total distribution is counted as income to the beneficiaries and reduces the rental loss carryforward by $10,900.
Is there not a way in PS to allocate distributions to corpus?
Thanks.
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JessSBFP
Level 2
03-09-2023
02:29 PM
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Did you ever figure out how to allocate an expense to corpus in a 1041? I'm having a similar issue.
david3
Level 7
03-10-2023
12:22 AM
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Jess, that was so long ago I had to go back and figure out what happened.
PS was correctly allocating the distributions. It had something to do with depreciation and the end result was that the beneficiaries actually received deductions on their K-1s instead of income.
I'm not sure if you have the same situation with rental property and depreciation or if it doesn't involve depreciation.
Let me know if it is related to depreciation. If so, then the Tax Adviser has an article discussing the impact of trust depreciation and distributions.
If you can't find that article then I can send you an excerpt from the article with an example.
JessSBFP
Level 2
03-10-2023
09:40 AM
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Thanks for the quick response!
It sounds like my situation might be a little different after all.
We are allocating capital gains to the trust and dividends and interest to the beneficiary.
When we allocate the expenses (e.g. deductible expenses other than depreciation), ProSeries is allocating 100% of the expenses to the beneficiary's income (dividends and interest). I'm trying to figure out a way to split the expenses so that 50% are allocated to the beneficiary's income (dividends and interest) and 50% are allocated to the trust's capital gains.
