Do I use 2 forms or combine the info on 1 form?
-- I have 2 separate LLCs for 2 small properties.
-- the single member of these LLCs is our Husband and Wife Trust
-- we are told that the best way to report this when filing our fed tax returns to the IRS is to use the IRS 1041 trust form to file our federal taxes (please correct me if this is not what I should be doing)
-- each LLC has it's own FEIN number
1. Since each LLC has its own FEIN, do I file 2 separate IRS 1041 Trust forms?
or do I combine the info on one 1041 Trust form?
2. Also since I am filing an extension to file my personal federal taxes do I need to send the IRS form 7004 for each of these LLCs or will form 4868 suffice?
Check me on this, but aren't H&W trusts considered "grantor trusts", so that whatever would be on the trust's 1041 copied directly into your 1040? I can't speak to the LLC returns....
Arthur L. Rubin, AFSP, CRTP, Brea, CA
Corrected copy: a single-member LLC is a disregarded entity at the Federal level, and I believe the H&W Trust is considered a grantor trust, so also may be disregarded.
If I'm wrong, and the H&W trust is not disregarded, you will have to file a 7004 extension for the late 1065. The LLCs need not file Federal returns or extensions, but may need to file state returns.
Arthur Rubin, AFSP, CRTP, Brea, CA
An estate planning trust is normally a grantor trust. But some
people create irrevocable trusts or intentionally defective trusts,
which may change that outcome.
As for a single member LLC, the default is to be taxed as a
proprietorship. But it can elect to be taxed as a C-corporation or
an S-corporation. OP did not mention what they did in this regard.
Assuming the LLC is a disregarded entity, they would file Schedule C
for the businesses.
So the question is, do they file a separate schedule C for each
business, or one for both? My guess (I don't do returns other than
my own) is that there should be a separate one for each business.
Here is how I see it:
Step 1: figure out what your trust is. Is it a simple living trust, and
all income is "yours"? If so, you do not want to file a trust return.
If the trust is something more complex and/or will be keeping some of
the income in the trust or paying to other beneficiaries, they you will
file a trust return.
Step 2a: If Step 1 determines you have a complex trust and need to file
a trust return (regardless of these two LLCs), determine if either one
of the LLCs needs to file its own federal tax return. Have you elected,
for either LLC, to be treated for tax purposes as a corporation or a
partnership? If so, that LLC will need to file the appropriate federal
return, and its income will flow through to the complex trust. If not,
include their income and expenses on the appropriate form of your
trust's federal tax return, typically one schedule C for each LLC, or a
single Schedule E with each LLC's income and expenses shown separately
(each pertaining to a different property).
Step 2b: If Step 1 determines you do not have a complex trust and do not
need to file a trust return, determine if either one of the LLCs needs
to file its own federal tax return. Have you elected, for either LLC,
to be treated for tax purposes as a corporation or a partnership? If
so, that LLC will need to file the appropriate federal return.
Step 3: if step 2b is no, is either LLC community property and are you
in a community property state? If not, each LLC will have to file a
federal partnership return, with its income flowing to your personal return.
Step 4: if steps 2b and 3 show that neither LLC needs to file its own
federal return, include their income and expenses on the appropriate
form of your personal federal tax return, typically one schedule C for
each LLC, or a single Schedule E with each LLC's income and expenses
shown separately (each pertaining to a different property).
I will answer assuming that the H&W Trust is a grantor trust and is a
disregarded entity under federal tax law and the property in question is
residential rental property.
Unless the single member LLC is a C or S Corp., it is a disregarded
entity and its income and expenses belong to the single member owner
(the trust). As the trust is a disregarded entity, the income and
expenses will go directly on the husband & wife's tax return(s) (MFJ or
MFS). Typically, this will be a Schedule E unless the owners are
providing substantial services to the tenants. This would then be
treated as a business. Businesses owned by a husband and wife are
considered to be a partnership and would trigger a form 1065 unless you
make an election to be treated as a Qualified Joint Venture or if we
have community property it can be treated as a sole proprietorship.
At this point, I would advise you to seek professional help if it is a
business. Additionally, I am almost sure that there are other issues
when a grantor trust is the sole owner of the LLC that is not a corp. I
believe that the husband and wife would be responsible for the
liabilities of the property, but I am not an expert in this area.
An LLC must make an election either to be treated as an S-corporation,
a C-corporation or a disregarded entity (proprietorship/partnership).
That is clearly what Alan was referring to, not that it would actually
be a corporation.
The LL in LLC stands for "limited liability." So the owners of an LLC
would not ordinarily be personally responsible for the debts of the
LLC, even if it holds real estate. Of course, the assets of the LLC,
including any equity in the real estate, would be responsible for those
There is much confusion among people on this point, and I think it is
important to be clear. It still surprises me how people can own an LLC
and not get it. They hear that it is a "disregarded entity" and think
they can use the same checkbook for personal and LLC items. I have seen
on this forum people state that "since the LLC doesn't really exist" or
It is important to keep in mind, for the greater audience, that there is
more to life than taxes.
...because I have no idea what the definition is of "2 small properties"
in the original post. I therefore, picked one that is best guess for an
LLC. By including in my answer, the possibility of the rentals being a
business, I covered that base as well.
I find that rather confusing. Your answer is equally valid regardless
of whether the properties are residential or nonresidential, and the
LLC's rental of either type of property may or may not rise to the level
of a trade or business.
Thank you all for your input.
I wanted to add more info to my original posting for clarity since I wasn't very clear in my OP. Apologies.
1. The properties are small commercial properties ie offices.
2. The office properties are in FL.
3. The trust is a simple Husband and wife revocable trust.
4. We have made no elections of any kind re IRS or which entity /tax forms we will use. We have no knowledge of what to do and that is why we posted this.
Don't file a trust return.
Florida is not a community property state, so you need to file a
partnership return for each LLC, with the K1 numbers for each of you
flowing to your personal return.
LLC businesses or rental properties do not qualify for Qualified Joint
You can also elect to treat each LLC as Sub S or Sub C corporations, but
others can advise on the benefits or detriments of those possibilities.