Only one complex trust beneficiary received a cash distribution. All received stock distributions. Can all distributions (stock at basis value) be considered for Schedule B, line 10 along with the cash distribution? If only the cash can be considered, can the income still be shown on all the K-1s according to their %s? The balance of the cash will be distributed to all according to the trust beneficiary %s(taking into account this initial distribution) in the next year.
Why did they receive the distributions in stock? Did the trust direct that to be done? Again, read the trust document. And if they elected stock instead of cash, why would it be at basis rather than considered a sale by the trust?
However, Sec. 643(e)(3) provides that a fiduciary may irrevocably elect to recognize gain or loss on the distribution, as if the property distributed had been sold to the beneficiary at its fair market value on the date of the distribution. If such an election is made, the income tax basis of the property received by the beneficiary would be the adjusted basis of such property in the hands of the estate or trust prior to distribution adjusted by the gain or loss recognized by the estate or trust on the distribution. (The election shall be made on the fiduciary return for such taxable year, and shall apply to all distributions made by the estate or trust for that year. Once made, the election may not be revoked without the consent of the IRS.)
As previously mentioned, the decision as to whether or not to make the election will also effect the amount allowable as a distribution deduction to the estate or trust under Sec. 661(a)(2) and the amount that the beneficiary reflects as income under Sec. 662(a)(2). If the fiduciary does not make the Sec. 643(e)(3) election, then the estate or trust’s distribution deduction and the amount included in the beneficiary’s gross income is based upon the lesser of 1) the basis of the property in the hands of the beneficiary, or 2) the fair market value of the property at the time of the distribution.
To explain further,
Sorry, I didn't provide this info. this is an irrevocable trust created upon death of the owner.... Trust indicates all assets to be distributed to beneficiaries in set percentages. Held off on distributing all the cash to be sure all obligations were taken care of first (contributions, expenses, etc.) Stock was transferred "in kind," to beneficiaries, but not all beneficiaries received cash in the initial round of distributions. (Remaining beneficiaries were aware, etc of the cash distribution made)