Re: Tax preparation with Revocable Trust

Nov 05, 2007 1 Replies

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> When one establishes a Revocable Trust to shield assets from

>> probate, what ramifications, if any, are there for tax
>> preparation? Does a tax return of any kind have to be filed
>> for the trust? Would I still file a 1040?
> The filing requirement for the 1041 are independent of the
> filing requirements for the 1040.
> Each stands on its own.
> Generally, the filing requirement depends on income.
> Remember to also check the state filing requirements for the
> individual and trust tax returns.
> Each state has its own rules.

I'm not clear what your answer means. Do you disagree with the other posters that a 1041 is not needed and that I report income on my 1040 just as I always have? What do you mean about the income requirement determining filing? Thanks

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6551,00.html Q: What is a grantor trust? A: "Grantor trust" is a term used in the Internal Revenue Code to describe any trust over which the grantor or other owner retains the power to control or direct the trust's income or assets. If a grantor retains certain powers over or benefits in a trust, the income of the trust will be taxed to the grantor, rather than to the trust. (Examples, the power to decide who receives income, the power to vote or to direct the vote of the stock held by the trust or to control the investment of the trust funds, the power to revoke the trust, etc.)

An "irrevocable trust" can be treated as a grantor trust if any of the grantor trust definitions contained in Internal Code §§ 671, 673, 674, 675, 676, or 677 are met. If a trust is a grantor trust, then the grantor is treated as the owner of the assets, the trust is disregarded as a separate tax entity, and all income is taxed to the grantor. Q: Do trusts have a requirement to file federal income tax returns?

A: Trusts must file a Form 1041, U.S. Income Tax Return for Estates and Trusts, for each taxable year where the trust has $600 in income or the trust has a non-resident alien as a beneficiary.

All the income can be reported on your individual income tax returns if you like.

-- Paul A. Thomas, CPA Athens, Georgia

Re: Tax preparation with Revocable Trust

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