Can a trustee distribute capital gains to a beneficiary with the beneficiary being taxed on those gains instead of the trust?
Normally capital gains are not treated as distributable to beneficiaries except in the final year of the trust. The capital gains and losses remain in the trust as part of trust principal and the trust is taxed on the net capital gain. However, Treasury Regulation 1.643(a)-3 allows exceptions to this general rule, and provides examples.
Related Questions
- What if the beneficiary of the trust is a trustee of another trust (e.g. the unit holder of a unit trust is a trustee of a fixed trust)?
- Can a trustee distribute capital gains to a beneficiary with the beneficiary being taxed on those gains instead of the trust?
- Can a trustee be a beneficiary under a discretionary trust?
