My mother has a simple trust (a bypass with my father's assets) and I am struggling with an item for 2009. Using rough numbers, here is the situation. The trust had $7000 in dividends, and it realized $15,000 in capital losses. It also had $3000 in attorney and advisor expenses. I realize that the capital loss cannot be passed outside of the trust to my mother (the trust did not wind up in 2009), so I understand that $3000 of the capital loss will offset other trust income. That leaves me with $4000 in income and $3000 in expenses, for a distributable income of $1000.
It makes sense that I would only be reporting $1000 of income on her K-1, but the allocation isn't clear. I don't believe it is correct to put $4000 of dividend income and $3000 in capital loss on her K-1. Of her $7000 in dividends, some are qualified, some are not. Should I simply allocate the $1000 in K-1 income along the ratio of the qualified vs. non-qualified dividends?
Thanks.