Are trust to trust payments taxable? Here is the scenario:
I am the trustee of two irrevocable trusts (Trust A and Trust B). Trust B is listed as one of Trust A's beneficiaries. If I paid Trust B $10,000 in beneficiary payments, does Trust B have to claim that as taxable income? I am asking because I have heard that trust to trust payments are not taxable. I know that the other beneficiaries have to claim their distributions as income earned but I cannot find any reliable data on whether a trust does too.
The answer to your question is complicated. Is a transfer from Trust A to Trust B taxable? Maybe. When money or property is distributed from a Trust, the distribution carries with it a portion or all of the Trust income. If Trust A has income to distribute when the distribution is made to Trust B, then, yes, a portion of the distribution will be taxable. Trust B will pay the tax on that income unless it has offsetting losses or unless it distributes that income to its beneficiaries.
My advice would be for you to consult a CPA or tax lawyer to analyze the income of the trusts and calculate the amount of taxable income distributed, if any.
This response has been prepared as a courtesy to aid understanding the legal issues and procedures presented. The response was provided without knowledge of, or access to, all the facts and circumstances and probably does not address important issues relating to the question. No attorney/client relationship is formed or intended by the response given.
More information is needed but I do concur that you should sit down in person with a Trust attorney / CPA in Idaho. See Avvo.com under the link 'Fiind-A-Lawyer;. Good Luck to you.
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