irrevocable trust

[TAXMAN]

Trust holds 1 rental property consistly showing loss each year. No distributions to beneficary all years. Question? Trust wants to sell house reinvest in cd's etc and not make a distribution to the beneficary. I think tax wise could the trust sell the RE pass out the capital gain to the beneficary or does the trust have to pay the tax then pass out tax free the $ and thus close down the trust? Beneficary is a daughter (40 yrs old). Mom and dad originally set the trust up to keep it out of Nursing home attachment but Dad died shortly after trust was set up. Daughter really wants to give money back to mom as this was their original house. Mom bought new house 5 years ago when this was done after dad died. Not sure all this is revelent. Thanks

[Guest Taxed]

What would the potential CG be? If this particular property is a loss leader have they considered like kind exchange?

I have a client that had 2 rentals. One was in a "not so good" section of the town and was a perennial loss leader and maintenance problem. If taxpayer had sold it outright there would be a CG. Working with a broker they found a duplex in another part of town that was going through a short sale and it worked out to the benefit of the taxpayer because now there is positive cash flow.

[Lion EA]

Read the trust document.

You say they want the trust to invest in CDs, etc.; but your question had to do with distributing the gains and closing the trust. What is your question: investments for trust or closing the trust?

[jainen]

>>Read the trust document.<<

I believe what Lion means is, take the actual, certified copy of the trust document with all amendments in your hand. Remove the staple and photocopy the entire thing in order. Give the original back to the client, and make an appointment to discuss the tax implications. When you are alone, read every page in your normal research mode, using a highliter, margin notes, moleskin notebook, whatever.

[kcjenkins]

Jainen's advice is good. This is not a 'shoot from the hip' situation, actions taken can not be taken back in such a situation you want to CYA as much as possible. And give your final advice IN WRITING so that it can not be a 'but you said' situation.

[Terry D EA]

Lion, Jainen & KC all have given you the best advice possible. I deal with trusts and I flatly refuse to discuss anything or even begin to prepare the tax returm until I have the trust document in hand. As jainen said, copy it so you can make your own notes on it. And yes, follow KC with your advice in 'WRITING". I recently have had to insist that one of my clients not only has a note taker but records our meetings because of he said/she said back and forth stuff. Then when any resolution is reached it is put in writing. It may seem like a PITA but it is worth it in the long run. Just my 2 cents worth.