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Trust distributable net income will not include capital gain or loss. They are part of the corpus and not the income and hence you cannot get a distribution deduction for that. YOu cannot distribute the loss to the beneficiary in this case.
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Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.
Capital gains and/or losses are transferred to the beneficiary in the final year of the trust. It generally is not transferred before this period unless the trust document provides otherwise.
The treatment would depend on the terms of the trust and not based on the agreement between the beneficiary and the trustee.