TRUST HELP

[TAXMAN]

TP's have a living trust. Both are quite old and mentally challenged. Trust bought a handicapped van to be able to transport tp's to various medical needs. Trust is filing a 1041. Can trust write off the van?

[mcbreck]

A trust doesn't have itemized deductions for medical. That goes on the 1040. For a van to be deductible, you must have a letter from their doctor and then they only deduct the cost of modifications.

[DANRVAN]

4 hours ago, TAXMAN said:

TP's have a living trust

 

4 hours ago, TAXMAN said:

Trust is filing a 1041

Why is the the living trust filing a 1041 while the grantors are still alive?

 

[mcbreck]

I have multiple people who have living trusts file their own tax returns while alive because their attorney set it up that way. It obviously isn't required but you can do it that way. There are fees that can be deducted by the trust which the individual can't deduct.

[BrewOne]

same here.  But I have yet to see a brokerage service list fees that are specifically related to the account being a trust, which is a requirement for those fees to be deducted. 

[DANRVAN]

1 hour ago, mcbreck said:

tax returns while alive because their attorney set it up that way.

 

1 hour ago, mcbreck said:

It obviously isn't required but you can do it that way

I question why that would be the best practice considering the extra expense of filing a 1041 and K-1 when there are alternatives.

What is the net benefit to the client after the extra reporting cost?

[jklcpa]

1 hour ago, mcbreck said:

I have multiple people who have living trusts file their own tax returns while alive because their attorney set it up that way. It obviously isn't required but you can do it that way. There are fees that can be deducted by the trust which the individual can't deduct.

Are these revocable or irrevocable living trusts?  I believe that living trusts can be irrevocable, but I've never personally had a client with one.

[DANRVAN]

3 minutes ago, jklcpa said:

Are these revocable or irrevocable living trusts?

 

2 hours ago, mcbreck said:

It obviously isn't required but you can do it that way.

I take that to mean they are revocable trust and reporting on 1041 is optional.

[mcbreck]

1 hour ago, jklcpa said:

Are these revocable or irrevocable living trusts?  I believe that living trusts can be irrevocable, but I've never personally had a client with one.

These are revocable. On one it was all an ego thing for the husband to separate his investments away from his wife's (which didn't do a 1041). I have a friend who's a doctor who does it because he heard in a seminar it would help keep lawyers from including it in a lawsuit - it won't.

 

 

[Sara EA]

A revocable living trust usually goes on the grantor's 1040.  The exception is when the trust has an EIN and it is used on bank or brokerages accounts.  The trust gets the 1099s and must file a 1041.  You can elect Treas. Reg. § 1.671-4(a), which leaves the 1041 blank and provides a statement of income and expenses to be shown on the grantor's individual return.  It essentially tells the IRS that these amounts are being reported by the grantor.