The taxpayer and spouse are the grantors and co-trustees of a Revocable Trust. The Trust wholly owns an LLC, which operates an Amazon FBA business. The taxpayer and spouse reside in a non-community property state, and no tax election has been made for the LLC.

Tax Filing Questions:

1. Given this structure, should the business income be reported on Schedule C of Form 1040, or is a Form 1065 partnership return required?
2. If reported on Form 1040, should there be two Schedule Cs—one for each spouse?

Key Considerations:

• The LLC is wholly owned by the Trust, making it a Single-Member LLC (SMLLC) and a disregarded entity for tax purposes. As a pass-through entity, the Trust reports the income/loss
• Since the Trust is revocable, it is taxed as a grantor trust, meaning the grantors (taxpayer and spouse) are required to report the income/loss of the LLC
• An LLC owned by a husband and wife in a non-community property state is typically considered a partnership and must file Form 1065
• However, since the LLC is wholly owned by the Trust, the IRS may still treat it as a disregarded entity, allowing income to be reported on Form 1040 instead of Form 1065

Pros - what are your thoughts?