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Old 03-19-2015, 09:54 AM
Join Date: Jan 2014
Posts: 35
Trust 1041 return using TaxACT

I am using TaxACT to prepare a trust 1041 tax return as trustee. I have 4 categories of income on the return: interest, taxable dividends, tax exempt dividends from a muni bond fund and capital gains distributions. The software automatically adds all the income together and puts it on Schedule B, line 9 (income required to be distributed currently). The trust does not require me to distribute all income and I don't want to distribute the tax exempt interest since its not being taxed anyway at the trust or individual level. Is there a way to over ride the software so that the income on line 9 does not appear on the beneficiaries' K-1? Or does the IRS rules require all income to be distributed? Also can expenses of maintaining a house in the trust where one of the beneficiaries lives, deductible? I know real estate taxes are but how about if the trust pays for the heat, water bills, snow removal, etc. Or should I just consider those expenses as an income distribution on behalf of the beneficiary?

Also the software is indicating that tax is owed at the trust level. To zero that out can I distribute to the beneficiaries any capital gains distributions from mutual fund holdings? The beneficiaries are in very low tax brackets and most likely would owe little or any additional tax due to these capital gains distributions.

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