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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 6176
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: 9 months ago.
Category: Tax
Expert:  Stephen G. replied 9 months ago.

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

Customer: replied 9 months ago.

yes, LTG of $ 53,137

Expert:  Stephen G. replied 9 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 8 months ago.

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

Steve G.