Have a Tax Question? Ask a Tax Expert
Hi, this is Rick. I'm a CPA based in NYC. Generally, when the trust earns money, it is taxable, whether the money is taken out or not. But it really depends on the trust and the nature of the distribution.
A complex trust is one that is allowed to accumulate income, whereas a simple trust can't. But whether the money is taxable depends.
Who is preparing the tax return for the trust, yourself or an outside advisor?
Generally speaking, the K1 recipient reports income per the K1 and the trust reports its own income. Cash distributions from a trust may or may not equal the amount on the K1.
It depends on a lot of things. Have a look at this and see if any of it resonates.
Was this trust specifically setup to pay education expenses?
Basically, the article says that the distributions could be taxable, but it depends on the terms of your particular trust. Do you have the trust document so that you can review it?
Let me know if I can help more. I'm happy to go deeper into the trust document with you. If you're satisfied with my help, please give me good feedback. Otherwise let me know how I can further help. -Rick