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Newbie Trust Question - No 1041 required?

I have a client who walked in with income from two sources - one source associated with her own social and another source associated with a trust TIN. (AB trust established at the time of spouse death.)

The 2007 return did not include K1 income. Instead, the sources of income associated with a trust TIN were included on a personal return as income / dividends without a separate accounting.

From what I have been able to identify, it seems that a 1041 should

have been filed. Are there circumstances where this isn't necessary?

Reply to
Norm
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See the regulations under IRC Sections 671-679 for details. Originally, it it sounds like a grantor trust (no 1041 filing requirement), but the death of the spouse may have changed things.

Reply to
D. Stussy

Yes, that's normally how these things work - on the death of a spouse the family trust gets split in two, with one half continuing to be revocable (e.g. grantor trust) and the other half becoming irrevocable (no longer a grantor trust).

Also normal, the irrevocable trust pays all its income to the surviving spouse, so from a practical standpoint the result is the same - the irrevocable trust gets a deduction for all its income, and the surviving spouse is taxed on it.

But I believe the 1041 is still required even though, after the deductions, it has no taxable income.

Stu

Reply to
Stuart A. Bronstein

in article snipped-for-privacy@g38g2000yqd.googlegroups.com, Norm at snipped-for-privacy@gmail.com wrote on 3/19/09 9:51 PM:

The IRS will be happy to accept the taxes on income that was not reported under her SSN but not so happy when they go looking for the 1041 and its associated income. 1041 is required if over the filing limit.

Uncompensated advice guaranteed correct or double your money back

Frank S. Duke, Jr. CPA Cincinnati, OH USA

Reply to
Frank S. Duke, Jr.

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