You write---" Now he needs money to repair the family home he lives in by himself, since Mother died. I got him a check for over 10,000.00 out of the family trust,to put in his checking account to complete the repairs."
Does the trust own the family home? Is the $10,000 of repairs considered an upkeep cost? Is your brother doing the repairing or just lining up the contractors and paying them for the work? Are you the trustee?
The "trust account" files a tax return each year.
Principal distributions from trusts are not taxable to the beneficiaries.
However, income (dividend, interest, gains, earned income) distributions are taxable, to the extent they exceed expenses and losses of the trust, since they were earned on the principal of the trust after the death of the trustor. Income may be taxable to the trust or taxable to each individual beneficiary, and sometimes a beneficiary will have to report income even though it was not actually received. Conversely, it could be that after expenses and losses, the trust will have losses that may be allocable to each beneficiary.
It is the responsibility of the trustee of the trust to file IRS Form Schedule K-1 for each beneficiary of the trust, showing reportable income, gains, and losses from the trust that are allocated to each beneficiary. The trustee must also send a copy of this Schedule K-1 to each beneficiary.
In addition, your state likely has a state form Schedule K-1 that also must be filed.
You can go the the IRS web site and find the relevant publications or talk to a tax preparer, or even better talk to the trustee (the trustee is liable for the accuracy of the K-1).
NOTE: I an not an accountant, but work closely with owners, beneficiaries, and trustees of trust accounts....trust document is the most important "director" of what you can and cannot do.
Good luck---you may want to talk to your tax preparer to figure out the "best" way to report this (income, distribution, expense)?
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