T/S own Rev. Trust. Trust wholly owns LLC. LLC operates business. How to report Income? 1040 or 1065?

[taklecpa]

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? 

[BobKamman]

You're playing with Russian nesting dolls here.  The LLC is a disregarded entity.  The trust is a disregarded entity.  Give my regards to the husband/wife partnership, the first level where anything really exists.  

[taklecpa]

Hi Bob, thanks for the reply. 

At first when I read disregarded entity I thought the conclusion would be income/loss to be reported on 1040 Sch C. However, you stated husband/wife partnership. 

To be abundantly clear - do you believe a 1040 or a 1065 is required? Please do explain your rationale especially given you stated both LLC and Trust are disregarded. I'd like to hear your professional interpretation. I have so many windows open right now and I feel I can make an argument for either if I wanted to. 

[BobKamman]

I'm here to help real people with real problems, not to reflect on how many angels can dance on the head of a pin. Most people with LLC's and revocable trusts don't need either, and most people who should have such an arrangement, don't.  They got themselves into this situation, I'm sure you can help them get out of it.  

[taklecpa]

I'm entirely not following what you're saying. This is a real person, and this is a question I have as a professional. I can't figure out if  you're trying to be helpful or intentionally annoying. If I'm not mistaken, this is a forum where professionals can collaborate without having themselves or their clients judged. If you know the answer but don't want to offer it, so be it. If you don't know the answer, stop being pretentious, it's completely unnecessary. 

[qbteachmt]

Why have you asked the same question of the same people three times?

Here is your original topic, already being answered by peer volunteers:
https://accountants.intuit.com/community/proseries-tax-discussions/discussion/revocable-trust-granto...

It helps to keep it to One Topic, so that you don't get answers in multiple places and so that anyone reading your topic can see the help you're already being given and doesn't need to reinvent the wheel. Thanks.