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 :}
The regulations provide for a couple of different ways to report things in the case of a grantor trust.
- The default way. Income is reported to the trustee using the trust's EIN. The trustee files a 1041 and checks the "grantor trust" box on page 1. The trustee must leave the rest of the 1041 blank. Instead, the trustee attaches a statement (not a K-1) to the 1041 explaining all of the income of the trust and the identity of the grantor. The
1041 return and the statement are filed with the IRS and the statement must also be provided to the grantor, who then reports the income on the grantor's 1040.
- Opional Method #1. Income is reported to the trustee using the grantor's social security number. The trustee provides the grantor with a statement of all of the income reported to the trustee, and the grantor reports this income on the grantor's 1040. No 1041 is filed. This is by far the most common way to handle things.
- Optional Method #2. Income is reported to the trustee using the trust's EIN. The trustee files a 1099 with the IRS indicating that the income should be reported on the grantor's tax return. The trustee provides the grantor with a statement of all of the income reported to the trustee, and the grantor reports this income on the grantor's 1040. No 1041 is filed. I have never seen this method used in real life. There's another method that can be used if there are two or more grantors and if the grantors are not married. I've never seen that method used, either.
--Chris
>
>
>
>
>
>
>
>
>