My question is
A discretionary trust has an operating loss from trading activities for the year of $222k. It also has a Gross Capital Gain of $892k from the sale of an investment property it held for 6 years. The beneficiary is the company. how much i can distribute to the company? 892k or 670k?
I think it's 892k because the revenue and capital gains are separated. The losses don't interact with each other. I think it's the 'profit' and net gains that form the income to be distribute
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https://community.ato.gov.au/s/question/a0JRF000004SYE9/p00408891
I think the confusion is between distributing a loss and calculating trust net income. The loss cannot be distributed to the beneficiary, but ATO Community says trust tax losses can reduce the trust’s net income, and net capital gain is part of that net income. net income reduces to 670k, which is distributed to corporate beneficiary. is this logic right?
https://community.ato.gov.au/s/question/a0JRF000004SYE9/p00408891
Best to read the trust deed to see how distributions to beneficiaries are determined.
“Yes, I agree the trust deed is critical for working out what is distributable to the beneficiary. My question is more about the tax side — whether the current-year trust loss reduces the trust’s overall net income before distribution. My understanding is the loss cannot be distributed itself, but it can still affect the amount left to distribute.
If the $222k is a current-year non-primary production loss, should it only flow through item 20 to item 24, rather than also going to item 27U losses info? Also, if a trust loss cannot be distributed, why does the Statement of distribution show the $222k loss in the beneficiary section? Is that just showing the tax components rather than an actual distribution of loss?
Also, if a trust loss cannot be distributed, why does the Statement of distribution show the $222k loss in the beneficiary section?
That should not happen.
58 Statement of distribution – item B - for current year trading loss $222k, tick box loss?A, A1 A2 B1 B2 are nil. so share of income is -$222k?
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