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FEIN and 1041 for Sec. 678 Trust?

Thank you for any help here.

The situations detailed below haven't come up yet for us, but they're in the offing. I know how things were done thirty-odd years ago when I was in the business but they may be different today.

  1. The grantor of a post-11/24/1981 revocable trust that never had an FEIN dies, and next beneficiary in line becomes sole trustee with full power to withdraw income and corpus unilaterally: the new trustee/beneficiary has no power to amend or revoke the trust but could theoretically exhaust the corpus and leave the trust empty. Of course the new beneficiary is treated as owner under IRC Sec. 678.

Does the trust need to get an FEIN and file a pro-forma 1041 as "grantor type," listing all taxable and deductible activity on an attached schedule, to be repeated on the deemed owner's 1040, or can the trust use the new deemed owner's SSN on its investments and file no 1041?

  1. The beneficiary of a simple trust that has been filing 1041 dies, and the next beneficiary in line, as in case #1, becomes sole trustee with full power to withdraw income and corpus unilaterally; again this new beneficiary, who was not the grantor, is the deemed owner under Sec. 678.

Can this trust keep using the existing FEIN it has had while the previous beneficiary was living and file the same sort of pro-forma 1041 as I described in the second paragraph of question #1, or does it need a new FEIN during the new beneficiary's time? I imagine it must file form 1041 and cannot not use the new beneficiary's SSN. I also expect that it cannot keep filing as a simple trust when it clearly comes under Sec. 678.

Thanks for any assistance.

Reply to
DWT
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If it was a grantor trust under the grantor, and continues as a grantor trust under the successor trustee, I doubt that an EIN would be necessary - after the death of the grantor, the successor trustee becomes immediately responsible for any income after that point.

There might be issues of whether some income is in respect of a decedent, but that's another issue.

Was the first beneficiary considered the grantor of a grantor trust? Did it use his EIN or did the trust get a separate one?

If it had its own EIN, it can continue using the same one. Of course, the beneficiary is actually the one who claims any income on his tax return.

If it becomes a grantor trust after not being a grantor trust, I don't see that the trust would continue to need to file 1041s. It's no longer a simple trust, but a grantor trust. As a grantor trust it can be ignored for most tax purposes.

Reply to
Stuart Bronstein

What do you mean "pro forma 1041" and "to be repeated on the deemed owner's

1040"?

The 1041 would be a "real" tax return, listing all details required, and issue a K1 to any beneficiaries, who would then not "repeat" the details, but just insert the one or few numbers from the K1 to the appropriate places on their 1040.

can a trust file a 1041 WITHOUT getting its own EIN?

Reply to
taxed and spent

Thank you, Stuart.

Stuart Bronstein wrote in :

| If it was a grantor trust under the grantor, and continues as a | grantor trust under the successor trustee, I doubt that an EIN would | be necessary - after the death of the grantor, the successor trustee | becomes immediately responsible for any income after that point.

My question is about filing procedures; of course the new trustee/beneficiary will be reporting the income, but on reflection I'll be more comfortable getting an FEIN and filing pro-forma 1041s for it as a Sec. 678 trust.

| There might be issues of whether some income is in respect of a | decedent, but that's another issue.

Yes, of course.

| Was the first beneficiary considered the grantor of a grantor trust?

No. It was created from a grantor trust at the grantor's death (and even the original grantor trust had an FEIN, because it had started before 1981-11-24) for the grantor's widow, and during her widowhood it has had encumbrances that disqualified it from Sec. 678 and made it a simple trust instead. The widow is now getting close to death and the next beneficiary in line will be their son, who will be sole trustee when the beneficial interest becomes his upon his mother's death, with full withdrawal powers, making him deemed owner under Sec. 678. | Did it use his EIN or did the trust get a separate one?

The original grantor trust from which the simple trust in my question #2 had been carved had had an FEIN because it was funded and had started reporting before 1981-11-24, and the grantor chose to continue using the FEIN and to continue filing pro-forma 1041s for it so as to keep it clear that its assets were in the trust and would not pass into his probate estate. At his death this particular trust was one of those funded from it under the indenture and has been a simple trust for his widow's benefit since then, so it has a different FEIN from the one that the original grantor trust had during her husband's lifetime.

| If it had its own EIN, it can continue using the same one. Of | course, the beneficiary is actually the one who claims any income on | his tax return.

Yes, that's how pro-forma 1041s for grantor-type trusts work.

| If it becomes a grantor trust after not being a grantor trust, I | don't see that the trust would continue to need to file 1041s.

Well, that's the question: a grantor trust still owned by its grantor is exempt from using an FEIN or filing form 1041, but what about a Sec. 678 trust that whose deemed owner is not the grantor?

Now, one thing that I realized since my first post is that the simple trust (in question #2 of my first post) will have some excess deductions that should flow into the new deemed owner's 1040, so if its future under Sec. 678 requires an FEIN and pro-forma 1041s, it will be better to file a final return for the simple trust's FEIN and get get a new FEIN for its future as a Sec. 678 trust.

Reply to
DWT

"taxed and spent" wrote in :

| What do you mean "pro forma 1041" and "to be repeated on the deemed owner's | 1040"?

I mean the kind of 1041 that a trust treated as owned by the grantor had to file before 1981, and which as far as I know, no longer being in the business, a trust treated as owned by somebody _else_ under Sec. 678 still has to file.

| The 1041 would be a "real" tax return, listing all details required, and | issue a K1 to any beneficiaries, who would then not "repeat" the details, | but just insert the one or few numbers from the K1 to the appropriate places | on their 1040.

No, it wouldn't, not if the trust has a deemed owner under Sec. 678.

| can a trust file a 1041 WITHOUT getting its own EIN? Of course not.

If the second trust I asked about has no excess deductions at termination (where the "termination" is really its conversion from a simple trust to a Sec. 678 trust), we might keep using its current FEIN.

Reply to
DWT

What do you mean "pro forma 1041" and "to be repeated on the deemed owner's

1040"?

The 1041 would be a "real" tax return, listing all details required, and issue a K1 to any beneficiaries, who would then not "repeat" the details, but just insert the one or few numbers from the K1 to the appropriate places on their 1040.

can a trust file a 1041 WITHOUT getting its own EIN?

=================== The OP answered his own question: If he is deemed the SOLE owner under any of the provisions of IRC sections 671-679, then no 1041 is required. However, in the first year of ownership/control over the trust (or the first year where filing a 1041 stops), a statement indicating that a trust is included is required to be attached to the owner's/controller's 1040, especially where such a consolidation is elective (not all of sections

671-679 are mandatory provisions). The OP claimed he's the effective owner under 678, so no 1041.

If a trust does file a form 1041, it must get its own TIN. It cannot use the SSN of the controlling party.

A trust with two or more simultaneous trustees or beneficiaries must use form 1041. It cannot be consolidated to a 1040.

Reply to
D. Stussy

The deemed owner is treated just like the grantor, and no 1041 is necessary. Read Stussy's post on this point - it's excellent.

Reply to
Stuart Bronstein

"D. Stussy" wrote in :

| The OP answered his own question: If he is deemed the SOLE owner under any | of the provisions of IRC sections 671-679, then no 1041 is required.

My apologies to the group; the 2014 1041 instructions say that that option is available for a Sec. 678 deemed owner who is not the grantor; either that wasn't the case in 1981 or I misunderstood the regulation then, and I came away believing that the option of using the owner's TIN and filing no 1041 was available only when the deemed owner was the grantor or a married couple who were joint grantors filing a joint 1041.

I should have headed straight there and not bothered the group.

| If a trust does file a form 1041, it must get its own TIN. It cannot use | the SSN of the controlling party.

Of course.

| A trust with two or more simultaneous trustees or beneficiaries must use | form 1041. It cannot be consolidated to a 1040.

I believe that such consolidation is permissible if the grantors are a married couple filing a joint 1040.

Thank you very much, D. Stussy.

Reply to
DWT

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