Prepare the 2012 fiduciary income tax return
For example, if Betty received $50,000 in principal distributions during 2012 then she would have to report this amount on her tax return as ordinary income; however, if she also had $5,000 in interest earned from investments then this would be treated differently and taxed at a lower rate (<15%). Additionally, if there were any deductible expenses associated with the trust such as legal fees or accounting services these would need to be accounted for as well.
Once all relevant amounts have been determined, one can then prepare a Schedule K-1 for Betty Blue that includes all necessary information about her share of the trust’s income and/or expenses. This document should include details like her name & address, total net income (or loss) allocated from the trust, any applicable deductions or credits available to her due to being a beneficiary of said trust etc.; once completed it will serve as proof of these items when filing taxes for that given year.