1041 trust

Forum|Forum|5 years ago
April 15, 2021
3 replies
21 views

The taxpayer died mid-2020. Her irrevocable trust went to two sons who liquidated in January 2021.

The 1099 reports capital gains before and after death. Are these gains subject to trust tax?

ProSeries Professional

This topic has been closed for replies.

George4Tacks

Level 15

Sales up to date of death go on the 1040. After death they go on the 1041. You might consider what is in this article. https://www.thetaxadviser.com/issues/2013/dec/clinic-story-02.html

Answers are easy. Questions are hard!

W

wardpallottaAuthor

Level 3

Are the 1041 capital gains subject to trust tax?

BobKamman

Level 15

Capital gains would be based on FMV at date of death. The 1099-B might not show the correct basis. Consider a fiscal-year 1041 under Section 645 so only one return has to be filed and gains flow through to beneficiaries on their 2021 return.

sjrcpa

Level 15

If the trust owned the stock at the time of sale, the sale is reported on the trust's 1041.

Were the stocks in the trust before she died?

You say irrevocable trust. Was it treated as a grantor trust? If not, there may not be a step up to date of death value.

If it was a grantor trust, the others answers are correct.

The more I know the more I don’t know.

W

wardpallottaAuthor

Level 3

Stocks were in the trust before death. The trust was irrevocable before death. The irrevocable trust was created in 2007 by the taxpayer's mother when the mother died. Would it qualify as Grantor?

BobKamman

Level 15

Maybe it was an Intentionally Defective Irrevocable Trust! (We were just talking about that yesterday . . .)

So the trust has been filing 1041's since 2007? Then you don't get stepped-up basis, and the capital gains are probably taxed to the trust, although that depends on state law and the trust document.

Sign up

Login with SSO

Let's get you signed in

Login with SSO