K-1 issued to Trust

[Bklyn1_241]

TP receives a few K-1 (1065) forms in the name of her trust that has it's own EIN.  How would you report this?  Does the trust need to file a tax return separately?  Would you include the income with the TP personal return?

Furthermore, there are CA state K-1s attached but the TP resides in another state.  Is there a CA state tax filing obligation?

 

[jklcpa]

52 minutes ago, Bklyn1_241 said:

TP receives a few K-1 (1065) forms in the name of her trust that has it's own EIN.  How would you report this?  Does the trust need to file a tax return separately?  Would you include the income with the TP personal return?

Furthermore, there are CA state K-1s attached but the TP resides in another state.  Is there a CA state tax filing obligation?

 

 

No one can begin to answer your questions without knowing the type of trust.

[mcbreck]

If the trust has its own EIN and is getting tax forms, it should be filing a tax return. How it's handling that income is written into the trust documents.

[DANRVAN]

6 hours ago, Bklyn1_241 said:

trust that has it's own EIN.  How would you report this?  Does the trust need to file a tax return separately?  Would you include the income with the TP personal return?

 Most likely  the trust will need to file a separate tax return if the income is $600 or more.

6 hours ago, Bklyn1_241 said:

Would you include the income with the TP personal return?

That will depend on the type of trust and distributions from the trust to the individual.

 

Depending on facts and circumstances, the trust might claim an income distribution  deduction and  prepare a K-1  for the individual.

[jklcpa]

3 hours ago, DANRVAN said:

Most likely  the trust will need to file a separate tax return if the income is $600 or more.

I would agree, it is most likely. Believe it or not, and this was years ago, but I have seen cases where revocable grantor trusts with all powers retained by the grantor that did have EIN assigned, and that is why I asked for the type of trust without further elaboration.

[Bklyn1_241]

Thank you for all the information.  I am awaiting more details from the TP that I will share once I have it.

  

 

[michaelmars]

If a grantor trust it can just go on the individuals return.

[Sara EA]

In this case, the trust has its own EIN and is receiving tax docs in its EIN, so it has to file a return.  If the grantor retains power of appointment, it is a grantor trust and the 1041 is blank with the explanation that Reg 1.671-4(A) governs.  ATX must have a box to check for that.  Then all the income and expenses go on a statement attached to the 1041 and end up on the grantee's return.

[Bklyn1_241]

Per the executrix of the will and trusts, this is an irrevocable trust for distributions to siblings.  The siblings receive Form K-1 (1065) each year as their trusts are in a partnership where some of the income is sourced in CA.  Help! 

 

[Lee B]

I am really glad that I decided that I don't have the expertise to prepare Estate and Trust Tax Returns.

[BulldogTom]

On 3/23/2023 at 9:01 AM, Bklyn1_241 said:

TP receives a few K-1 (1065) forms in the name of her trust that has it's own EIN.  How would you report this?  Does the trust need to file a tax return separately?  Would you include the income with the TP personal return?

Furthermore, there are CA state K-1s attached but the TP resides in another state.  Is there a CA state tax filing obligation?

 

50 minutes ago, Bklyn1_241 said:

Per the executrix of the will and trusts, this is an irrevocable trust for distributions to siblings.  The siblings receive Form K-1 (1065) each year as their trusts are in a partnership where some of the income is sourced in CA.  Help! 

 

 

I am confused a little bit on who your client is.   Is it the Individual or the Trust?  Or both?  Is the Executrix your client for the Trust?   Are there multiple trusts (like one for each sibling)?

The Partnership seems to be reporting to your client their trust's share of income and expense and sourcing it to the state earned.   Good so far.   The trust (is the trust your client) should be producing tax return(s) based on the 1065 K-1 information and reporting appropriately to each state where there is a filing requirement and providing a 1041 K-1 to the beneficiary(s).   The beneficiary(s) should be reporting the information from the trust K-1 on their individual returns to the IRS and the states where they have a filing requirement based off the source of the income.

Tom
Longview, TX

[Abby Normal]

Sounds like the trusts are partners in a partnership. The trust should file a return reporting the K1 income on a 1041. then issue a K1 to the beneficiary. but you'll need a full accounting of the trust's income, expenses and distributions.

[Bklyn1_241]

47 minutes ago, BulldogTom said:

 

I am confused a little bit on who your client is.   Is it the Individual or the Trust?  Or both?  Is the Executrix your client for the Trust?   Are there multiple trusts (like one for each sibling)?

The Partnership seems to be reporting to your client their trust's share of income and expense and sourcing it to the state earned.   Good so far.   The trust (is the trust your client) should be producing tax return(s) based on the 1065 K-1 information and reporting appropriately to each state where there is a filing requirement and providing a 1041 K-1 to the beneficiary(s).   The beneficiary(s) should be reporting the information from the trust K-1 on their individual returns to the IRS and the states where they have a filing requirement based off the source of the income.

Tom
Longview, TX

My client is the individual (not the executrix or the trust).  The individual receives a Schedule K-1 (1065) in the name and EIN of her trust.  I believe each sibling receives one as well.

If I understand you correctly, the following should occur:

       (1)  Individual receives K-1 (1065) and CA state K-1 for her trust

       (2)  Trust should file Form 1041 and issue K-1 (1041) to individual.  If the source state requires a trust tax return, then one needs to be filed as well.  

       (3) Individual reports income from K-1 (1041) on personal federal return and source state return.

is this accurate?

 

[DANRVAN]

I have a similar situation.  Partnership makes distribution to trust; trust makes distribution to individual.

 

Trust deducts tax prep and income distribution deduction.  Very simple. 

 

Trust also follows 65 day rule since partnership makes distribution right at year end.

[Lion EA]

(1) Trustee receives K-1 (1065) and CA state K-1 for the trust.

(2) Trustee makes sure Form 1041 is prepared -- federal and state(s) and issues Forms K-1 (1041) to beneficiary

(3) Individual reports income from K-1 (1041) on personal federal return and source state return and resident state return.

[Bklyn1_241]

Thank you all for the wealth of information.  It is truly appreciated.