Trust question

[anita1]

Hi Follower tax preparers,

I have received a Maryland Trust from a new client. The Trust has only one item in the Trust. A NJ vacation rental property. But the previous tax preparer did not file a NJ state tax return for the beneficiaries to pay NJ taxes for the net rental income. Yes income. Her response was the Trust was created in Maryland therefore a Maryland K-1 is generated. This does not make sense to me. How does NJ get its share of the taxes.  Am I wrong here? Should the k-1 be a NJ k-1? not a Maryland k-1?

[IRonMaN]

I believe you are correct.  If it is NJ generated income, you can still file a NJ return for your client if necessary whether or not there is a state K-1 indicating that it is NJ sourced income.

[BobKamman]

Have you been asked to prepare the 1041, or the beneficiary's 1040, or both?  A state trust return should be filed for both Maryland (if that is where the trustee or beneficiaries reside) and New Jersey (if there is income from that state).  Beneficiaries should receive the state version of Schedule K-1, for both states.  They may show the beneficiary as either a resident or nonresident.  

[anita1]

I am preparing the 1041. There is no income in Maryland. The k-1 is for a Virginia resident and the other is for a Maryland resident. Why should they receive a Maryland k-1 ? They should not be taxed in 2 states for the same income? There is no interest from the checking account in Maryland. The property is generating net income in NJ. What would be on the Maryland k-1?