65-day distributions and other prior year transactions

[David Derr]

Thanks, John. These ideas sound promising. The trust is not court supervised
but I want to make this accounting as clear and helpful as possible. I will
"play around" with the liability account idea.

If anyone has other ideas, please chime in. Again, the problem in a
nutshell: A trust income distribution to the income beneficiary was "made"
(funds transferred to beneficiary) in early March 2017 before the 65-day
deadline to make 2016 distributions. I need the distributions to show-up
somehow in 2016 (which the IRS allows) but record the transfer on the date
the transfer was actually made.

Thanks again, 
David

-----Original Message-----
From: John Ralls [mailto:jralls at ceridwen.us] 
Sent: Thursday, March 30, 2017 10:09 AM
To: David Derr
Cc: gnucash-user at gnucash.org
Subject: Re: 65-day distributions and other prior year transactions


> On Mar 29, 2017, at 12:52 PM, David Derr <derrjd at gmail.com> wrote:
> 
> I am using Gnucash to keep the books for a family trust. As trustee I 
> elected to make a 65-day rule distribution (IRC 663(b) election) of 
> 2016 income to the beneficiary in 2017 before the 65-day cutoff date 
> (early March).
> 
> Additionally, one of the ETFs that the trust funds are invested in 
> made a "prior year" cash dividend on 1/4/2017.
> 
> How should these transactions be entered in Gnucash? Do I enter them 
> with a
> 12/31/2016 date so that the income is including in all 2016 reports? 
> (When a
> 663(b) election is made on the second page of Form 1041 for the trust, 
> the distribution is considered as made on the last date of the 
> previous year by the IRS.) Or do I enter them on the date the 
> transaction was made (or dividend received) and make some adjustment to
the accounts for 2017?
> 
> Any help would be appreciated.
> 

David,

Here's how I'd do it; I'm not an accountant, though I am a trustee for some
estate trusts for my kids. If this trust is court-supervised then you should
ask your accountant. If not supervised then how you keep the books is
between you and the beneficiaries.

I'd book the dividend on 12/30/2016 and reconcile it in January, and I'd
flow the distribution through a Liability account, incurring the liability
on 12/30/2016 and redeeming it when I did the actual transfer to the
beneficiary. That serves to remind me that the tax effect of the
distribution is in the prior year while not making it hard to reconcile the
bank/brokerage statement.

Regards,
John Ralls