Hi Lev, My name is ***** ***** and I need a little clarification on one of your posts on where to report medical
's K-1 that came out of the principal, not trust income
. Using your response below, I don't understand where you said to put the amount paid on beneficary's behalf from principal in box H with an explanation. Box H seems to refer to something about net investment income tax
. Did you mean to enter it in box I instead and just state
that the amount was distributed out of principal and is not taxable to the beneficiary?On Schedule B
, line 10 of Form 1041
you would report distribution that may be deducted from taxable income
- as medical expenses
are not deductible
for the trust - you should not report that amount. You will report only distributed income - that is $300; The same amount will be reported on the K-1. Other distribution was not from income but from trust assets
- that are not reported on the trust income tax return
nor may reduce tax liability
.But you may report that information in the box 14 with the code H and may add a separate sheet with details - so beneficiary would know the source and type of distribution. for instance - in your situation - medical expenses may be deductible for beneficiary.
JA: Thanks. Can you give me any more details about your issue?
Customer: i'll use easy numbers to simplify. I'm trustee of a complex trust (special Needs) and trust made $300 income. I paid $12000.00 medical bills for beneficiary with trust checks. On k-1, i'll make a $11,700 distribution from the principal and $300 from trust income
JA: OK got it. Last thing — Tax Professionals generally expect a deposit of about $32 to help with your type of question (you only pay if satisfied). Now I'm going to take you to a page to place a secure deposit with JustAnswer. Don't worry, this chat is saved. After that, we will finish helping you.