• Excluding net capital gains from partnerships and trusts income item

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    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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    If you are a beneficiary of a trust, you may be entitled to (or may have received) a share of the net income of the trust which includes some of the trust's net capital gain.

    In this case, you deduct your net capital gain included in your share of the trust income from your share of the trust income and show the remainder in the Partnerships and trusts income item in your tax return (item 12 for individuals).

    Trustees, including fund managers, may use different terms to describe the calculation methods and other terms used in this guide. For example, they may use the term 'non-discount gains' when they refer to capital gains worked out using the indexation and 'other' methods.

    Note
    Item 12 for individuals

    Item 12 in the tax return for individuals asks you to exclude net capital gains from the amount of trust income shown at label U item 12 in your tax return. In your distribution statement, the trust should state the amounts of capital gain in your trust distribution.

    In place of the amount you exclude, you are treated as having a capital gain (or capital gains) worked out, as explained below.

    However, if your statement shows that your share of the trust's net capital gain is more than the overall net amount of your share of the trust's net income, do not exclude the whole capital gain component when you complete the Partnerships and trusts income item in your tax return (item 12 for individuals). In this situation, you exclude instead only the overall net amount of your share of trust income. You also use only this lesser amount in working out your capital gains.

    Example
    Capital gain greater than share of trust net income

    Debra's trust distribution shows that she received $2 000 as her share of the net income of a trust.

    This is made up of a primary production loss of $5 000, non-primary production income of $2 000 and a net capital gain of $5 000.

    In item 12 in her tax return, Debra will show $5000 loss from primary production at label L and $5000 non-primary production income at U.

    She excludes only $2 000 from item 12 because her share of the net income of the trust ($2 000) is less than her share of the net capital gain. The $2 000 is the amount Debra uses in working out her net capital gain at label A item 17 in her tax return.

    Last modified: 31 Aug 2010QC 16195