K-1 WORKSHEET WITH 1040 TRUST

[SFBOB]

I am having a problem with a client that has rental property in a Disclaimer Trust. The trust is irrevocable and created upon the death of her husband in 2007. In all years prior to 2010 the losses if any, stayed in the trust 1041 return. Now with 2010 ATX software, the loss flows to the 1040 line 17 through the K-1 data entry.

If any of you have a taxpayer with rental property in a trust, be very careful.Reporting depreciation has also changed. Rental Income, not including depreciation is reported on the K-1 line 7. Depreciation is reported on line 9. When the data flows to the 1040 through the K-1 worksheet, it nets out correct on line 17.

NOW HERE IS THE BIG ONE. The depreciation reduced the line 7 income and then went forward to the 8582 in the 1040 return for a passive loss carryforward to 2011. In other words the client gets to deduct the depreciation twice. I any of you have a client with this type of transaction, carefully check your work. Please E Mail me at [email protected], if you wish to discuss the problem. I have forwarded the infomation to CCH. Thanks Bob

[SFBOB]

Sorry I should have said 1041 not 1040.