Author Topic: 401K question involving trust income  (Read 783 times)

Frugalbeach

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401K question involving trust income
« on: September 25, 2017, 11:18:56 AM »
 Hi everyone,
     I have a pretty specific question, which so far, I haven't been able to find a definite answer to.  I am researching an investment in a small trust which would be held in a 401K account.
     The trust is setup like a REIT; all the income from the trust is distributed to unit/shareholders who are responsible for the taxes due.  The distributions are historically quite high as a percentage of investment.  The fly in the ointment is that shareholders are responsible for paying Louisiana state taxes, their home state taxes and federal income taxes.  You are allowed a depletion allowance which softens the blow somewhat.
      What I'm thinking is if you held the shares in a 401K account you would be able to bypass the significant tax hit.  So far my research on Google is all over the map, with answers from maybe, to definitely not.  Obviously, I'm skeptical that the IRS would let this 'loophole' even exist.  I guess I'm looking for any guidance you could offer.
     Thanks for any input.

MDM

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Frugalbeach

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Re: 401K question involving trust income
« Reply #2 on: September 26, 2017, 06:28:53 AM »
No, it's a petroleum and gas trust which has been around at least 20+ years that I know of.  Another thing to think about is that the wells could eventually dry up.