Completing Form K-1 for Trust Distributions: Determining Filing Requirements

DNI Calculations, Allocating Trust Income from Pass-Through Entities Between Corpus and Income

A live 110-minute CPE webinar with interactive Q&A


Tuesday, November 6, 2018

1:00pm-2:50pm EST, 10:00am-11:50am PST

or call 1-800-926-7926

This webinar will provide fiduciary tax advisers and compliance professionals with the tools needed to navigate the unique challenges in reconciling and completing Form K-1 for estate and trust beneficiaries. The panel will discuss income classification and allocation of the trust’s income distribution deduction among multiple beneficiaries and detail the interplay between the trust document, fiduciary accounting income, and the beneficiaries’ K-1s.

Description

Determining whether to issue a K-1 to a trust beneficiary, as well as what to report, can present particular challenges to a tax adviser. Depending on the provisions of the trust operating instrument, a beneficiary may receive a distribution that is taxable to the beneficiary, or one that is partially taxable. Also, a beneficiary may receive a distribution without receiving a K-1 or having the requirement to include the amount on his or her 1040. Further, a beneficiary may under some circumstances receive a distribution from a pass-through entity that does not match the amount reported on the trust’s K-1, resulting in tax to the trust on the difference.

The requirement to issue a K-1 depends on the trust document, the type of property distributed and whether the distribution is a specific bequest or a discretionary distribution, and on the calculation of distributable net income (DNI). Advisers must consult the trust document and the rules carefully to determine the extent to which a distribution is taxable solely to the trust, solely to the beneficiary, or partially taxable to both.

Distributions to a trust from a partnership or pass-through entity present further challenges to fiduciary tax preparers. If the trust document is silent as to the allocation of pass-through income and distribution requirements, the UPIA requires the trustee to use good faith in estimating the amounts allocable to principal vs. allocable to income. Tax advisers need to understand the specific rules on the DNI treatment of distribution amounts on income received from a pass-through entity.

Listen as our experienced panel provides a practical guide to the challenges of completing and issuing a K-1 to trust beneficiaries.

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Outline

  1. Rules for when a trust is required to issue a K-1
  2. Allocating taxable income amounts between trust and beneficiary in cases of trustee discretion to distribute
  3. Treatment of specific bequests
  4. Calculating allocation of trust income from pass-through entity between trust corpus and income

Benefits

The panel will discuss these and other important topics:

  • Differences in tax and K-1 treatment between specific bequests, formula bequests, and distributions made from trustee’s discretion
  • K-1 reporting of income that is partially taxable to the trust and partially taxable to the beneficiary
  • Calculating taxable amounts on trust income from pass-through entities and how to report on beneficiary K-1

Faculty

Bridgers, Griffin
Griffin H. Bridgers

Atty
Hutchins & Associates

Mr. Bridgers' practice encompasses all areas of private wealth and family business. In addition to estate...  |  Read More

Charlton, Klaralee
Klaralee R. Charlton, J.D., LL.M.

Shareholder
Katz Look & Onorato

Ms. Charlton practices fiduciary tax, estate administration, and business transactional law. As part of her...  |  Read More

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