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Hi everyone,
We have a trust that the grantor is not the trustee but his sons (also beneficiaries) are. There were no distributions to beneficiaries in the current year. We are wondering if it is OK to pass on filing K-1's so all the tax is paid at the trust level.
Any help is appreciated.
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Member
 
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Last Login: 12/1/2009 12:47:02 PM
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if no distributions, and its not a simple trust (distributions are not required)- my recollection is that you still should file k-1s (disclosing the benes name/address/ssn info with no income/deductions). the only potential problem that i can see if you leave out the k-1s, is that the return might not be "complete" so that i.r.s. could possibly try to argue that the statute of limitations is not tolled (i have not seen them do this... i am just trying to think of the worst case scenerio).
if it really is a complex trust, with no distributions, it will pay the tax whether you attach k-1s or not.
IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any matters addressed herein. |
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Power Member
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What are the terms of the trust?
John Jacobson
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| Is the grantor/father still alive? If so, he should be paying the tax on his personal return whether any distributions were made or not.
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I forgot to mention that the trust is a grantor trust and the grantor will paid all the tax on his returns. Because the grantor is not the trustee, we believe the trust is required to file a return. Do you agree? If so, is it necessary to attach K-1's?
Thanks for your insight!
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See the regulations for reporting grantor trust income -- one of the options does not include filing a 1041 (even if the trustee is not the grantor).
Nelson
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Power Member
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| I hope I'm following this discussion. Did Nelson have a typo? When I have a grantor trust where the trustee is not the grantor, I always file Form 1041 and attach the blurb about it being a grantor trust. When the grantor is the trustee, no Form 1041 is required and I believe the regs were changed so that no Form 1041 is required with an outside trustee if the grantor picks up all of the income. I continue to file in this case though to keep it *top of mind* and make it easier to transition to a complete 1041 when the grantor dies. The grantor trust Form 1041 does not have Schedule K-1s.
Mary Kay Foss
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