> Herb Smith wrote:
>>> "Benjam>>>>> 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.
>>> This answer is incorrect for revocable trusts (Living
>>> Trust). Such a trust is an ignored entity for income tax.
>> I wouldn't call it incorrect. He says the filing
>> requirement depends on income. In the case of a grantor
>> trust, the trustor is taxable on all trust income, so the
>> trust itself as no taxable income. As a result, there is no
>> need to file a return for the revocable trust.
> I'm confused. Most are saying no need to file a return for
> the revocable trust (which is equivalent to a grantor
> trust), and in fact, one should not. I still don't
> understand what Ben's statement about "the filing
> requirement depends on income". Is there a situation where
> these trusts do have to file a return? Remember, I only
> know enough to be dangerous :}
In a nutshell Ben's post should be shredded as it is irrelevant. You either have a grantor- revocable living trust/1040 situation, or you have an irrevocable trust /
1041 situation. There are other "grantor trust" situations where a 1041 is required even though all the income is pass-through and reported on someone's 1040. I'm the trustee of several of these where the child is the trust beneficiary but all the income is taxed on the parent's return. None of these are your situation. You have a simple REVOCABLE tiviing trust where the current beneficiaries are the grantors and you should ignore it for tax purposes until one of the grantor's dies--then it gets a lot more complicated. There is no ohter "choice", nor dependentcy upon income of any kind. The 1041 Instructions are confusing in that they dwell on these other types of Grantor trusts, but if you read the instructions on page 5 you would use optional method #1 and the TIN # is your SS #.There used to be a specific statement that directed you r situation to NOT file a 1041, but I can't find it this morning. Believe me. Do not use a 1041, Do not apply for a TIN # for your trust. Report all the income on your 1040. ed
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