Capital Gain distribution from a Trust - Gross up?

Yes the trustee is legally in 'debt' to the beneficary once the resolution is made. but they may retain this income under the terms of the trust - or until the beneficiary calls for it.

If you received $200 out of a $400 capital gain the trustee possibly owes you the other $200. But this will depend on the wording of the trust deed - the definition of income and the streaming powers.

 

Ross - it owes me Y.

Still keen to hear / understand grossing Y up to X (consuming double the amount of my carried forward capital loss) in the context of the amount of the distribution received (being Y not X).

I think the best example given so far is the $100 / $200 - which, correct me if I am wrong, confirms everything in my original post that I unfortunately must gross up to X despite only receiving Y and losing a large chunk of my carried forward capital loss. No better way of doing it.

 

Just think of it as yourself making a capital gain

You have a $200 capital gain. Normally after the 50% discount this becomes $100 and this is added to your other income.

But as you have a $200 capital loss the $200 gain is first reduced by the loss = resuling in $0 capital gain.

Losses are applied before the 50% discount.

 

And net trust income may not actually be a beneficiary entitlement if the trustee doesnt make a beneficiary entitled. Just because it is in the financials doesnt mean its right. Maybe the accountant wasnt correct in making that entry ?

eg : In the OP example lets assume the trustee makes a mess of the distribution. It could be that only half of the CGT income was distributed to beneficiaries and the other half remained undistributed due to defect in the drafting of the resolution to distribute. The accounting treatment could have been incorrect.
1. Read deed
2. What does the resolution truly say ?
Legal opinion may be needed.

I came across this with a deceased estate recently. The accountant had given incorrect CGT advice to lawyer who based calcs on the accountant advice and this led to a shortfall in beneficiary entitlements to one beneficiary v's another which was contrary to will. Accountant was held liable for that loss.

 

Sounds like it. I am a bit confused with all the different opinions which are all good in their own way but I get the feeling you are on track.

It is also confusing because you can do a couple of things with the accounting rules and revaluing assets or devaluing them in prior years.

It is also hard to understand as each deed is different.

And trust law is complex.

I get a "vibe" that your accountant is looking after the family as a whole and s/he is trying to reduce the overall family tax liability. I feel that you have capital losses so your accountant is streaming them to you (in accordance with the deed hopefully and trust resolution).

If that is the case and you are concerned you are not getting looked after properly at the expense of other family members - just let the accountant know outright.

Your accountant should be able to point to the numbers and clearly articulate what is going on.

Cheers

 

It was in my interest as well to receive the distribution (you know the saying - dollar in the hand) and I had the option to turn it down. I'm simply trying to explore any other options to maximise the benefit so hence putting it out onto the floor to some smart people here to see. If the maximum is that I lose X amount out of my carried forward loss then c'est la vie.

I had to make a call whether the distribution was more valuable than the carried forward capital loss I would forgo.