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Facts:
Single Decedent died 11/16/06. All assets were held in trust, and will continue to be held in an administrative trust during period of administration. We are contemplating the benefit of electing an fiscal year end of 1/28/07 to obtain deferral of income tax to beneficiaries from admin trust.
Issue:
Does the filing of an extension for a trust which indicates a CALENDAR year end in any way prohibit the trust from electing a FISCAL year end when the return is actually filed?
I have had an estate (not a trust, if it makes a difference) come upon this situation, and the IRS via a phone call told me that the filing of the extension and corresponding year end on the extension were not determinative of the actual year end. Instead, the actual year end chosen on the initial return would control. This return was filed in 2006 and no notices have been received, however, i don't have any support for this position.
Any insight would be greatly appreciated.
Thanks in advance.
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The advice you received before is correct (in my experience). The year end selected on Form SS-4 or an extension request does not fix the due date for a timely filed return.
If the return were to become delinquent so that the year end was not selected on a timely basis, then you have another problem.
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A couple of points here:
You may make the Section 645 election when you file your first fiduciary income tax return. You need to file Form 8855 with the return. You need to also mark the 1041 as "estate" even though you are filing for a trust.
You make mention that you would have a fiscal year end of 1/28/07. You must first of all file for month end (i.e. 1/31/07). You may file a short year return for your first return. If the decedent died in November 2006, you can actually file up to October 31, 2007 for a fiscal year.
Trusts filing under the 645 election are allowed to file fiscal year returns for two years from the decedents date of death or up to six months after the closing letter for the estate tax return is received, whichever is later.
You can get extra benefits by making the 645 election.
You won't need to make estimated tax payments the first two years
You will be allowed to take up to $25,000 of passive losses without them being suspended
If the trust is still open after the allowed time has expired, you must obtain a new EIN and file calendar year returns from there on.
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