Is this an estate or a trust? If a trust, what type of trust? Is this a final return? Were there distributions?
IRS instructions for that line have many more words than just "enter capital gains".
Include all capital gains, whether or not
distributed, that are attributable to
income under the governing instrument
or local law. For example, if the trustee
distributed 50% of the current year's
capital gains to the income beneficiaries
(and reflects this amount in column (1),
line 19 of Schedule D (Form 1041)), but
under the governing instrument all
capital gains are attributable to income,
then include 100% of the capital gains
on line 3. If the amount on Schedule D
(Form 1041), line 19, column (1), is a
net loss, enter zero.
If the exclusion of gain from the sale
or exchange of QSB stock was claimed,
don't reduce the gain on line 3 by any
amount excluded under section 1202.
i.e. What does the "governing instrument" say to do?