joshuabarksatlcs
Level 10

Not enough facts.  It could be very simple but could get complicated, depending on the facts not given.  Just typing out loud of my thoughts without fiscal year consideration:

1.  @sjrcpa is correct.  NO need for Grantor trust from 4/20 thru DOD - that is, provided trustee was the grantor during that period.  If the trustee was NOT the Grantor, technically, a Grantor trust return may be needed  and a grantor tax information letter has to be sent to each "deemed owner". See various sections of Regs. Secs. 1.671-4(b)(2) and 1.671-4(b)(3).

2.  Period from DOD to 12/31/2020 - filing requirement depended on the trust income. 

3.  For 2021, to report the sale, check the escrow info.  Basically "Who was the seller?"

4.  Based on the facts as stated, the Trust may not even have FEIN.  If 1099 was/were issued, to whom and whose SSN?  I am careful in matching the tax reporting to 1099's.  For a sale, it may be necessary to include a "dummy sale" and clarification note if the sale was reported on the 1041 and K-1.  NO fun when client got a bill of x% of the gross sales per the 1099 a year or two later.

5.  If the sale was reported on the heir's (heirs') SSN, could there be a "deemed distribution" from the Trust to the beneficiaries?  (To me, this is a legal question, NOT a tax question.)  If the (competent) answer given to me is yes, the distribution is NOT reported on 1041; Client may still choose to file 1041 anyway, with the sale reported on 1040. 

The exact reporting decisions could basically be "1099-S" driven.

6.  California has a withholding tax Form 593.  If care was not taken and state tax was withheld, it could lead to some "janitorial tax services".

Hope this is not TMI.


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