Get 2004 Form 1041 (schedule J). Accumulation Distribution For Certain Complex Trusts

A simple trust can take a $300 exemption. A complex trust can take a $100 exemption.

Accumulation distribution. An accumulation distribution is the excess of amounts properly paid, credited, or required to be distributed (other than income required to be distributed currently) over the DNI of the trust reduced by income required to be distributed currently.

An exempt trust, also known as a bypass trust or an AB trust, is an estate planning tool that allows married couples in California to reduce or avoid estate taxes on some of their assets.

Complex Trust Explained In order for a trust to be complex, it must do one of the following each year: Refrain from distributing all of its income to trust beneficiaries. Distribute some or all of the principal assets in the trust to beneficiaries. Make distributions to charitable organizations.

Schedule J (Form 1041) is an attachment to Form 1041, U.S. Income Tax Return for Estates and Trusts. It is used by certain complex trusts to report the accumulation distribution. An accumulation distribution refers to the taxable income that the trust retains instead of distributing it to the beneficiaries.

Complex Trust Taxation Complex trusts can take deductions when computing taxable income for the year. This deduction is equal to the amount of any income the trust is required to distribute for the year. A complex trust qualifies for a yearly $100 exemption as well.

How are these irrevocable trusts and others trusts taxed by California? COMMENT: If all the income is distributed to the beneficiaries, the beneficiaries pay tax on the income. Resident beneficiaries pay tax on income from all sources. Nonresident beneficiaries are taxable on income sourced to California.