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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 6475
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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Is there a special "penalty" exempt income by a trust? All

Customer Question

Hi Steve; is there a special "penalty" for tax exempt income by a trust? All the income was distributed to the beneficiaries, but there is a substantial tax regardless. Any thoughts?
Thanks. Chris
Submitted: 11 months ago.
Category: Tax
Expert:  Stephen G. replied 11 months ago.

Chris: Tax exempt should be tax exempt. Were there capital gains involved?

Customer: replied 11 months ago.

yes, LTG of $ 53,137

Expert:  Stephen G. replied 11 months ago.

That's probably where the tax is coming from? Generally the capital gains aren't passed through to the beneficiaries except in the final year of the trust. I can't remember the details of the trust at the moment. If the Trust permits it there's no reason why the capital gains aren't passed through. I know in MA I had an legal opinion that it could be done; (truthfully I'm not sure the lawyer actually knew, but I wasn't going to ask twice :]) it also depends on local law;

Expert:  Stephen G. replied 11 months ago.

Hey Chris, are we all set on this one now?

Steve G.