The trust has income and assets. Is it possible for the trust to make a distribution to its beneficiaries from its assets rather than income, DNI?
For example, imagine the trust has $1M in stocks. It also earns $500k in income. Could it distribute the $1M in stocks to its beneficiary but the trust retains the $500k in DNI. Thus the trust pays taxes on the $500k? Or does the $500k of DNI always get transferred to the beneficiary, and now the beneficiary is responsible for the tax liability associated with it?
Would the same hold true for a distributed promissory note?
Before you respond saying “consult a tax attorney,” Yes, this has been done. I know this is complicated and in their avenue. I am simply asking a community of knowledgeable people, many of which are professionals with good judgement and opinions.
[Title clarified - moderator Kendall]
For example, imagine the trust has $1M in stocks. It also earns $500k in income. Could it distribute the $1M in stocks to its beneficiary but the trust retains the $500k in DNI. Thus the trust pays taxes on the $500k? Or does the $500k of DNI always get transferred to the beneficiary, and now the beneficiary is responsible for the tax liability associated with it?
Would the same hold true for a distributed promissory note?
Before you respond saying “consult a tax attorney,” Yes, this has been done. I know this is complicated and in their avenue. I am simply asking a community of knowledgeable people, many of which are professionals with good judgement and opinions.
[Title clarified - moderator Kendall]
Statistics: Posted by MindfulMoneyManager — Tue Sep 03, 2024 11:27 am — Replies 1 — Views 83