Christian

That information is most helpful. The daughter is the trustee so I will work with her. There is a glitch in that the lawyer setting up the trust advised that the trust could use the mother's social security number for the trust. This caused no problem with her final return. However, an insurance company refused to pay on a policy until the trustee obtained an ein which she did. Now for tax reporting we have what ? two eins. I plan to use the ein she applied for although the interest reported to the trust by other payers show her ssn. Maybe I should show the social in parentheses after the ein.

A client set up a trust for her mother who was in mental decline fearing she might need to be placed in a nursing home and would exhaust her assets. Under advice of her trust attorney she used her mother's social security number instead of obtaining an ein for the trust. All tax reporting forms indicating a trust used her social which worked ok. The mother died in December 2018. Th client left the trust in place insted of disolving it with the result that after her death income has fallen into the trust. I normally do not prepare trust returns but in reviewing Form 1041 there is a checkbox to use for that purpose. The income is dividends and interest and will simply be shown as passed through to the heir for her return. The trust will be disolved this year with assets being passed to the client. My question do I use the calndar year of 2019 for the trust year? If not since she died in December 2018 what twelve month period do I indicate ?

I agree Eric and that is what I will use. The Pell Grant fills that bill leaving some $705 of uncovered qualified expense which the dad covered by payments and loans. Thanks to all for all assistance. Having yall's assistance to clarify this was much appreciated.

Thanks to all for your input. It looks like I will be able to get the client an AOC credit. Two of his scholarships are unrestricted meaning they MAY be used for meals, room & board non-tuition expenses. They do not HAVE to used for these expenses. To my mind these amounts may be credited to his daughter which will produce no taxable income to her and $1685 of fee income dad covered becomes eligle for the credit. The federal instructions are typically difficult to understand. My last qualm is if these scolarships HAVE (are required) to pay for these non-tuition expenses as opposed to MAY to qualify as taxable income. The Pell Grant is open ended and does not REQUIRE that it be used for non-tuition costs as is the other scholarship. Any clarification on this final point is appreciated.

Aftermuch head scratching. The client had $5,950 in qualifying education expense in 2019. He received $2,223 in scholarships which were unrestricted meaning they could be used for any of his daughter's expenses. The amount I can prove he paid would be $1,685 in mandatory fees (he paid for books but can't segregate the checks). My problem now is the ATX program shows all expenses covered by the scholarships and is tax free income and I can't transfer the $1,685 to the education credit federal form.

I have asked him to bring me a copy of the scholarship to determine it's full requirements. A guess is it will require coverage of tuition leaving about $2000 for other use. I am making the assumption (not a great idea in this line of work) that if he used this part for books , fees, etc that part can be used for the AOC with any residual reported under the daughter's return if filed. I am also assuming I would need a billing statement from the burser's office to prove this just in case? Of course, a call to the practitioner hotline yielded the advice that the entire scholarship is tax free and this will need to weigh on my final determination as I don't want any possibility of an IRS problem. On that basis he gets no credit and there is no need to even report info from the 1098-T.

Once more into the breach dear friends. Lion I gather from your post I can add the ENTIRE scholarship to the daughter's return as income reported by her even though she did not work. In doing so she would incur a tiny tax liability. Her father then can claim the AOC even though his child's entire college expense except room and board is covered by her scholarship? Good grief am I dreaming? And just so you will know I am already their hero. Where in the instructions is this written?

First, I would like to thank all of you responding. The parent does not qualify for any credit or tuition and fees deduction by my lights since his tuition was fully covered by the scholarship. The remaining scholarship amount in excess of the tuition was used to buy books, fees, etc. This exhausts the entire amount. I plan to file dad's return and simply not claim the credit as his expenses at the college amounts to what he is paying for room and board. I regard him as a lucky dad having much of this huge expense covered by scholarship funds. I do not see a large number of returns using these education credits so this forum is a godsend for an aging coger.

That may not be correct. I am listening to the impeachment hearing and mulling tax problem at the same time. I have figured that no credit or or additional tax is due since the scholarship amount in excess of the tuition was used for fees, books, and instruction materials. However this leaves a question as to the legality of simply adding the full amount of the scholarship into the parent's income. I seldom encounter a payment of a scholarship in excess of the tuition charged by the college hence my concerns to get it correct.

If I include the entire scholarship in dad's income the resulting credit produces a much higher refund. If memory serves me this is allowed. I am thinking it would be entered on the other income line of the Form 1040.

How does one make this election as the daughter had no income in which case a filed return would indicate no tax due unless the full amount is allocated to the daughter? I am unfamiliar with this provision of the credit.

A client has come in with his Form 1098-T his daughter having entered college in September of last year. His tuition expense was some $4,200.00 which was covered by a scholarship his daughter received of some $6,400. He is paying some $400 monthly for room and board. The amount by which the scholarship exceeds the tuition is my question. Is it considered taxable income. I have been reviewing the relavent IRS material on the credit but have not resolved this as yet.

Was unaware we had a Supreme Guru. I feel more secure. A post of mine a few years back returned almost thirty responses and hardly anyone agreed with anyone else as to the correct answer.

Nope it was the Cadillac tax they are discussing.

I briefly saw a news blurb yesterday about Congressional changes to the tax code which become effective for 2019. I am wondering if the Net Investment Tax is one eliminated but can now not locate the source. I suppose there is always hope.

Ah, just in the nick of time ! A new SIMPLIFIED tax form for older folks !

Kudos to our forum moderator who always comes through with such superb answers. His problem is he claimed credits to which he was not entitled. They have disallowed all of them and sent him a bill for additional tax with penalties and interest. The way I read this he is in a few words " up the creek with no paddle".

I have got to write a letter for a friend requesting waiver of penalties and interest for an error he made on his 2018 tax return. His tax record is clear for the proceeding three years and beyond. I've not found it necessary to write one of these in ages. Do I merely state he is requesting a one time waiver of interest and penalties or do I need to provide some code section or other? Any help is appreciated. I have told him it very well may not succeed so he is not expecting a miracle. Also, if he sends his check paying the additional tax and penalties will they refund them ?

Also thanks. I'll remember to watch for the individual one.

The cousin's wife had a regular IRA and neither she nor the attorney she used evidently had an understanding of the beneficiary designation. She went to an attorney and did not advise her husband who after her death was presented with this surprise. The fiduciary as stated simply placed the assets into his account. They lived in Florida. These IRA assets were a settlement from her first husband. She had signed a divorce settlement stipulating that if he outlived her the remaining IRA assets in her account would revert to him. It was quite an interesting mess to say the least. As far as my client is now concerned he is going to sit down with the respective fiduciaries and do what's best and I'll get on the phone and get my own in order as well. Thanks again.

That was my understanding of how things went Sara but after reading Judy's post and referencing the provided website I changed my understanding of the issue. In point of fact my financial guy was of the same opinion that the entire balance was cashed out and fell into the estate as a taxable distribution. In my client's case the fiduciary will simply have to divide the account balance into three accounts with the heirs having to take distributions as indicated by the fiduciary. This looks to me to be a much simpler process than going the extra cumbersome step of moving the assets through his estate. In my cousin's case referred to above the fiduciary simply ignored his wife's expressed wishes as stated in her will and placed the entire account balance into his account. He had provided no waiver and the attorney she used evidently was not up on the law.

Many thanks. This clears this up. It's clear an individual is better served by indicating a beneficiary with the fiduciary organization which is a much simpler process. A cousin's wife died some time back and unknown to him had gone to an attorney and directed by her will that her IRA be placed in a trust for one of her grand children. The fiduciary had no beneficiary so listed and simply transferred the account into the cousin's existing account since he was of course her husband which made quite a mess of her wishes. My client is recovering and hopefully will have adequate time to addrss this himself. Making his estate the beneficiary is an extra step he can avoid as well as yours truly.

The client I spoke with who has this arrangement has now gone to a local hospital in not good condition. I decided to ask this question to the PPS as I may now have to confront this problem. The individual with whom I spoke said she did not know in fact stating " I don't know what you are talking about" and further advised she would transfer me to another area. Shortly thereafter the phone connection ended. So much for IRS assistance.

A client came by yesterday and in our discussion mentioned his 401K plan and IRA proceeds after his passing will be paid into his estate. I have never seen this as most have a named beneficiary who gets the account. I suspect it is not a great idea as it would seem to expose the full account proceeds to tax on a Form 1041 unlesss there are special provisions for these accounts. I myself have a similiar provision and plan to address it shortly myself. Information on this is appreciated.

He can in fact provide school resident records for two of the children. I am going to make a last ditch effort by calling the examiner myself as his number is listed. I have all clients check the third partry check box on their returns. Oddly I have found IRS folks reluctant to discuss much of anything in regard to this even though the Form 1040 instructions provide clear indications they would be expected to. He has now lost his job and their chance of recovery is at best not great. What are they going to do sell the guy's double wide or pickup and make him destitute? I think not.