What are the issues?

Will l be penalized (IM the income beneficary)?
l presume l will have additional cap gains or losss not already incurred.

Will the trust be penalized?

Will the trustee be fined/penalized?

l know in some states the trustee can be held personally liable even if he is exempted...but l am not yet sure of the consequences of the trustees failure.
Since l cant afford to pay any taxes resulting from this, l wonder what my options are?
My dad died in nov2006..
l had normal taxes in 2006.

My 2007 taxes on this, was only on cap gains specific to the gains of stock that was transfereed in kind.

NO K-1 or otherwise from the trust other than $2300 in stock or funds.. No sale till l sold some months later.

As of last month (Sep 2008) l started getting cash instead (per changes with the broker this trust is at).

But also discovery via the trustee that he though l paid taxes on the trust.

The trust is a spendthrift trust where l am entitled to recieve and till now recieved stock and from now on recieve cash instead.

Trustee is working with a CPA to figure out who owes what and how.

Sol expect to get a k-1 for 2007 at least.

My concern is what IRS or other may penalize or fine?

l have no intention to pay any fines or penaltys on what the trustee did wrong.

l already was aware of K-1 and tax potential in the normal situation.
The taxes l paid where the cap gains from stocks l sold (50% of what l got).

l am aware that the cap gains tax is lower on me than it will be on the trust.

My concern is the potential for fines.

The last time l was late on taxes it was expensive for me..
Meaning what?

ie; depsite the trust doc stating he is not liable for erorrs in judgement if done in good faith.

to me its a error that is obviously to me a disqualifuyng event (??) and definately not a good faith erorr.
It would be cool if l could actually email or talk direclty with either of you.
as l said. l sold about half of the stock l got via distribution.

Overall though my question is whether l will be penalized by IRS or not?
Yes, when it was sold (same year) it was reported... the issue isnt whether l paid on capgains l had, but the 'penalty per the trustee not doing his side of things.

They have had a variety of capgain & loss on stuff not distributed.
on my 2007, its on schedule D as:

two items as shortterm capgain loss with date acquired of 01/02/2007 and sold 6 months later one part and 9 months later (same year) on other.

Longterm that was acquired on 04/06/2006 and sold july and dec in 2007..
Hmm..just noticed a weird deal while looking at the return again.

Has acquired date that is 8 months earlier than my dads death.

That definately seems like a error, so l may end up redoing the 2007 with or without the trustee error.
Though not yet confirmed.
l belive my cost basis was supposed to be from date of death.

though tax guy said, same as dads..which sounds wrong too.

Will be getting with tax guy anyway per trustees problem.
Note that l am also having a fit trying to get more than just the dec statement and a holdings list.

(statement, not accounting).

Did u received the income? Does the trust document state that the income is to be distributed (even if it wasn't)?

If u r an income beneficiary, the income AND the income tax obligation with it flows through to u on the 1041 K-1. Thus the taxes go on ur tax return.

Additional info given.
''My 2007 taxes on this, was only on cap gains specific to the gains of stock that was transfereed in kind.''

Unless the stock was SOLD, u did not have any capital gain income. Stock that ur dad owned on the date of death got a step up value, so the only gain would be gain incurred from date of death to date sold. If u still have the stock, the income was not reportable. (If u had mutual funds, there could be some capital gains distributions.)

''NO K-1 or otherwise from the trust other than $2300 in stock or funds.. No sale till l sold some months later.''

So, u sold. Did u report the transactions on the 1040, schedule D? Did u put them on line 8, acquisition date of ''inherited'' & the cost basis of the value on the date of death or di u simple leave everything off of the tax return & then get a CP2000 letter saying the IRS was calculating this as short term, $0 cost basis & please send 25% by the end of the month?

Give the trustee a kick in the you know where. The trust is supposed to pay the income taxes since it is the trust earning the income. You are only getting a disbursement.