Thank you so much for this! I took a hard look at schedule D. What I see is:Although the gain is as you indicated taken out on Schedule B-Line 6, the amount of the gain allocated to beneficiary should be put back in on schedule B-line 3 (from schedule D-line 9-col a.) If all of the gain is allocated to the beneficiary, then line 7 should match line 1 (ignoring effects of tax exempt income and charitable deductions on lines 2,4,5.) Review how Turbo Tax is generating schedule D-line 9-col a.
If this can be fixed, this should allow you to treat the gain the same on the CA forms as you do on the federal forms. This doesn't answer the separate question of whether passing the gain through is the correct thing to do for your specific trust situation.
Line 4 (distributions) is blank.
Line 5 has the cap gain, which is then repeated on line 8.
And you are exactly right, line 9 has a blank for (a) and drops the entire amount on the fiduciary in (b).
This is the heart of the matter for sure. I will experiment with seeing if I can coax TT into allocating it to the beneficiary. If so, then I'll have two ways forward:
1. I can proceed with distributing the gain fully and pay no taxes at the trust level
2. I can just keep the gains in the trust and pay taxes to both the federal and state governments
It seems that (2) is reasonably safe and bsteiner has raise doubts about whether the trust really allows (1). I still need to be sure that (1) is OK, though, because in the long run I may need to be able to make distributions without paying exorbitant trust tax rates. In other words, even if I elect (2) I would like (1) in my back pocket down the road, or I need some assurance that I can distribute appreciated assets without triggering an immediate taxable event to either the trust or the beneficiary. The section 643 (e) (1) and (2) appears to support this, but muddies the waters with (3).
Statistics: Posted by dmcmahon — Sun Feb 16, 2025 12:46 am — Replies 17 — Views 835