Reporting trust distributions.

• Author: Harrell, Madlyn M.
• Position: Brief Article

In many situations, fiduciaries distribute income from estates and complex trusts to their beneficiaries to avoid the high income tax rates imposed on the fiduciaries. However, consideration also must be given to any generation-skipping transfer (GST) tax consequences of these distributions.

Therefore, it must be determined if any beneficiaries who received distributions are grandchildren or other skip persons and if the distributions are taxable distributions. Generally, a taxable distribution is any distribution from a trust to a skip person - except a taxable termination or a direct skip (Sec. 2612(b)).

Reporting requirements

If a trust makes such a distribution, the trustee must file a two-part Form 706GS(D-1), Notification of Distribution From a Generation-Skipping Trust, for each skip person distributee: Copy A for the IRS and Copy B for the distributee. These forms are due April 15 of the year...