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Lane
Lane, JD, CFP, MBA, CRPS
Category: Capital Gains and Losses
Satisfied Customers: 10106
Experience:  Have been providing Financial and Tax advice for 30 years.Concentration in Corporations, Estate, Income Tax and Business Planning
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Lane, Happy Holidays, Last year my trusts passed through

Customer Question

Hi Lane,Happy Holidays,Last year my trusts passed through their capital gains to me personally to offset personal income.This year the trust has a capital loss.Can that be passed through as well to offset personal income?.I read this but not sure what it meansLosses: If losses exceed gains, all losses are allocated to the trust. Capital losses can be
deducted against ordinary income (lesser of net loss or $3,000). Excess capital losses may
be carried forward indefinitely. Unused capital loss carryovers can be passed through to the
beneficiary at the termination of the trust.Thanks,Fred
Submitted: 11 months ago.
Category: Capital Gains and Losses
Customer: replied 11 months ago.
Hi Lane,
Un fortunatly I have already received a difinitive answer from my accountant.Gains can be passed through but losses can not except at the termination of the trust.Thank you anywayFred
Expert:  Lane replied 11 months ago.

Hi Fred ... I'm so sorry

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This question was asked in (or someone changed the category to) Capital Gains & Losses, and given that Capital Gains and Losses are subset of taxes, (which is a subset of Finance), I guess I thought I was "admitted to the Category," by default.

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I have now addressed that.

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So ... I could not respond to your question (DID NOT want you to think I was ignoring you)

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After contacting the moderators here it looks like they have now changed the category to add it to tax ... because I can now get to the question.

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But just to validate what your accountant has said, that is GENERALLY true;but it's not really that simple.

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Section 104 of the UPAIA provides the fiduciary with the "power to adjust" between income and principal to ensure a fair result for all beneficiaries.

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For states that have adopted it, a fiduciary may use a power to adjust if the fiduciary invests and manages trust assets as a prudent investor, the terms of the trust describe the amount that may or must be distributed by referring to the trust's income, and the trustee exercises the power to adjust impartially and based on what is fair and reasonable to all beneficiaries.

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Also see Gains and losses allocated to corpus but treated consistently by the fiduciary on the trust's books, records, and tax returns as part of a distribution to a beneficiary may be included in DNI (Regs. Sec. 1.643(a)-3(b)(2)).

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Anyway ... Just wantd to let you know that I fought to get back in and address your question

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Sorry it took this long

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Lane

Expert:  Lane replied 11 months ago.

I'll understand if you don't rate, but do let me know that you saw this ... (could make a difference)

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ALTHOUGH, generally, given trust rates and brackets, we'd want the losses to stay there anyway.

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Do let me know ...

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Lane

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Expert:  Lane replied 11 months ago.

Generally, this is what your accountant is referring to:

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A net capital loss of an estate or trust will reduce the taxable income of the estate or trust, but no part of the loss is deductible by the beneficiaries.

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If the estate or trust distributes all of its income, the capital loss will not result in a tax benefit for the year of the loss.

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Losses from the sale or exchange of capital assets are first netted at the trust level against any capital gains, except for capital gains utilized by the fiduciary in determining the amount to be distributed to a particular beneficiary (Reg. §l.643(a)-3(d)).

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On termination of an estate or trust, any unused capital loss carryover of the estate or trust is available to the beneficiaries .

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