Distributions

Overview

Distributions represent the allocation of income, credits, or other amounts to beneficiaries of a trust, shareholders of look-through companies (LTCs), or partners in a partnership. In TaxLab, distributions can be linked (connected to the receiving entity in TaxLab) or unlinked (not connected to an entity in TaxLab).

Create distributions

Distributions can be manually created or imported. You can read more about importing or exporting distributions here: Import distributions and settlements.

There are two types of distributions that can be created:

• Linked distributions: These will automatically populate the distribution information in the receiving entity. They will display a green dot next to the recipient’s name, indicating a successful link.
• Unlinked distributions: These will not automatically populate the distribution information in another entity. They will display a grey dot next to the recipient's name. 

Important: In order to link a distribution to another entity you must have access to the recipient entity, the relevant tax year opened and it must be in a Read-write editing mode.

1. Navigate to Workpapers >  Distributions.
2. Select New.
3. Under Recipient details enter the name of the receiving entity or beneficiary/partner/shareholder name. 
   • To create a linked distribution select the entity name from the drop down list.
   • To create an unlinked distribution do not select an entity name.
4. Populate all other relevant information for the distribution recipient. 
5. Populate the amounts by manually entering the figures in the correct fields or using the Attribution of income (loss) feature to allocate income and credits based on a percentage.
6. Select Save.

Distributions by entity type

Trusts

• Beneficiary tax resident status?: Resident or Non-Resident.
• Who is paying the tax?: 
  • Beneficiary: The beneficiary is paying their own tax on the distribution. They will still receive credits distributed to them. 
  • Trustee: The trust pays the tax on behalf of the beneficiary. You will need to specify the marginal tax rate for the beneficiary in the “Tax liability” section of the distribution. The credits distributed to them will be used to offset this liability to the extent possible. 
• Does the minor or corporate beneficiary rule apply?: Yes or No. 
  • Only select Yes if the specific minor or corporate beneficiary rules apply to the recipient. Selecting Yes will deem the distributed income to be trustee income and it will be taxed in the trust.
• Attribution of income (loss): Use percentages to allocate a portion of the income and credits from the trust.
• Beneficiary Current Account Information: If the trust is subject to the financial reporting for trusts requirements you will need to populate this section even if there are no taxable distributions.

Partnerships and Look-Through Companies (LTCs)

• 100% Distribution: All available income must be distributed.
• Allocation by Percentage: Useful for income or expenditure changes. Reallocate as needed.
• Exact Totals: Ensure the total distributed equals the amount available to distribute, rounded to two decimal places.

Troubleshooting

General

Blank distribution

• Issue: Sense check - Invalid field. Caused by a blank distribution.
• Resolution: Locate the blank distribution at the top of the table. Click ‘-’ under the column headers and delete the distribution.

Linked distribution not appearing in receiving entity

• Issue: The distribution isn’t added to the recipient entity.
• Resolution:
  • Ensure the recipient’s name is selected from the dropdown, and the dot beside the recipient name is green.
  • Verify that you have access to the recipient entity.

Distribution not displaying as an option to select in the navigation bar

TaxLab does not currently support linked distributions for other entity types. If you wish to record income such as a shareholder’s salary from a company to a shareholder, you will need to record this manually.

Trusts

Incorrect IRD Number

• Issue: The field ‘beneficiaryIrdNumber’ is invalid.
• Resolution:
  • Verify and correct the IRD number.
  • Ensure the IRD number includes a leading zero if applicable. If you are unable to edit the IRD number you will need a user with these permissions to do so.

Negative Other Income

• Issue: Inland Revenue no longer accepts negative “Other Income.”
• Resolution: Adjust other types of income being distributed to reflect net income that needs to be distributed. Scale tax credits accordingly.

Partnerships & Look-through Companies

Rounding issue

• Issue: Sense check - Income, deductions and credits must be fully distributed. 
• This is caused by a rounding issue where two or more fields in the distributions are not rounded to two decimal places.
• Resolution: Check the following:
  • Click into each field of your distribution(s) ensure that each figure is only 2 decimal places. 
  • Ensure that no formulas have been used in any field.
  • If the above does not work, export the distributions and check the total figures. If one of these is more than 2 decimal places, adjust the distributions as necessary.

Related articles

Import distributions and settlements