trust issues

[ALABOOKKEEPING SERVICES INC]

Hi All,

If a person who received a specific bequest from a trust, they should be issued a k-1 for the amounts received from the trust, is this correct?  The attorney is stating no, but it will not balance out the figures if only the 2 children report the and none of the rest are reporting what was received.  This is an issue with the attorney and the client right now.

Does anyone have any insight on this?

[agu...@bpfinancial.com]

If it was a specific gift for the trust assets I do not believe they will receive a K-1.  It depends on what kind of asset the specific gift is.  The two kids would probably receive K-1s, but only if there was income generated within the Trust.  The K-1 would not report the exact amount that the two children received because of the cost basis of items and not everything is income generating.  The K-1 only reports the beneficiary's share of INCOME to the Trust that is distributed, such as the capital gains on an account, not the full value of the account.  If your client was not to receive any of the income generated by the Trust, they would not receive a K-1.  For example, if your client simply received "$1,000 from the trust bank account" I do not believe there would be a K-1.

[jo...@rstaxplus.com]

I have an S-Corp with two 50/50 shareholders. One left in May of 2023 when company was running at a loss. The other owner (my client) created a profit at year end. The K1 for each partner is showing 50/50 split on the profits. Is there a way to remove the partner part year OR recalculate a partial year P&L (outside of the tax program) to show the one owners loss at that time and have it reflect through the K1?

There was no official sale of shares, just a change on the statement of Information with the Secretary of state. 

My client does now have a new partner/owner starting 2024.

 

Jodi

[Roger Mies]

Jodi. 

Your question is not related to his question in the forum.   Please start a NEW question inside the forum.  

Sent from my iPhone

On May 20, 2024, at 5:04 PM, jo...@rstaxplus.com wrote:



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[Kimberly A. Somers, EA, Inc.]

If you’ve got the P&L through the prior owner’s end date you should be able to specify by owner – or even if not – there should be some way to allocate in your software, whether by the date of change or even a percentage.  I’d check with your software provider.

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[jo...@rstaxplus.com]

I have an S-Corp with two 50/50 shareholders. One left in May of 2023 when company was running at a loss. The other owner (my client) created a profit at year end. The K1 for each partner is showing 50/50 split on the profits. Is there a way to remove the partner part year OR recalculate a partial year P&L (outside of the tax program) to show the one owners loss at that time and have it reflect through the K1?

There was no official sale of shares, just a change on the statement of Information with the Secretary of state. 

My client does now, starting 2024 have a new partner/owner starting 2024.

 

Jodi

 

[Rosalie Gates]

Yes the profit needs to be split according to the time owned.  Lacerte does a nice job of it but I don't know if your software handles

that.  You might have to hand calculate.  If you use Quick Books it is easy to find the proper amounts for each period.

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[Richard Job]

I think the first issue is to determine whether the specific bequest qualifies as a bequest under Reg 1.663(a)-1. If it qualifies, then the bequest is not included in the beneficiaries income (no K-1) and is not an income distribution deduction for the trust. If it does not qualify as a bequest, then it is a distribution that would carry with it a computed (usually pro-rated) amount of the taxable income of the trust, and that income would be reported on the K-1, and trust gets an income distribution deduction.

 

Richard C. Job CPA

 

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[Richard Job]

Yes, but if the shares were owned 50/50 for the entire year, the net profit or loss for the year is still split 50/50.

 

Richard C. Job CPA

 

Office Location

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