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Can Sch. E be used for a Form 1041 Grantor Trust tax return just for the purpose of tracking Depreciation/Amortization?

davetodd11
Level 5
I am filing a Form 1041 for a Grantor Trust.  I have selected only the "Grantor type trust" box in the top section A of the 1041.  I understand that the 1041 is for informational purposes only, and the data for the trust will be reported in a Grantor Letter, which I will include as an attachment to the returns.

I want to use the Asset Entry Worksheet to calculate depreciation/amortization amounts and track accumulated figures.    However, as soon as I fill out a worksheet, the depreciation amount carries to the Schedule E and I get an error on Form 1041 at the 'Grantor type trust' box stating, "Form 1041: Grantor trust box is the only 'Entity Type' box checked.  If the entire return is a grantor type trust, do not report dollar amounts on Form 1041."

The 1041 itself actually does not show any dollar figures, but the program is apparently triggering on the depreciation amount that is populating on the Sch. E, as I have entered no income and no other expenses.  

Is it possible to utilize the Asset Entry Worksheets for managing Depreciation/Amortization items without generating and submitting the Sch. E, or a way of using the Sch. E so that it does not carry over income/loss data to the 1041?  I would prefer to maintain as much data within ProSeries as possible, rather than keeping up offline docs and attaching them as attachments.
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10 Comments 10
ERIC J
Level 3

I just had the same scenario.  I dont have the PS Fixed Asset module to track depreciation, so I did this:  .  I drafted a 1041 as usual "as if" it were a non-grantor trust.  Then I "Saved as" this file as the file that became my filing copy - in this new file, I changed the type of trust to a Grantor trust and populated the Grantor worksheet using the data generated by the first file, which became my "dummy file" for tracking depreciation going forward.  As long as I remember not to file my dummy file with the IRS I should be OK - Ha!   

swongtax
Level 4

Please help if you can answer this question:

am working on a taxpayer's tax return who is a grantor of a Grantor Trust (with EIN) with a rental property that should be reported on the Taxpayer's tax return.

Question: The Grantor Trust Form 1041 is blank, with a statement attached to report rental Schedule E income and deductions on the Grantor's income tax return.  However, there is no depreciation on Schedule E (Form 1041), but the trust statement is instructing me to report the depreciation on the taxpayer's Schedule E.  On the state trust tax return schedule E, the depreciation number is appearing on that schedule E (as a federal/state difference item).  Am I supposed to include the depreciation number on the taxpayer's individual income tax return Schedule E? Why is the Trust Fed schedule E not showing the depreciation number and Trust state Schedule E showing the the deprecation number?

 

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davetodd11
Level 5

For a Grantor Trust, the 1041 should be blank except for that statement on p.1.  I've always had trouble with this in ProSeries, because if I populate the Schedule E and Grantor Letter, ProSeries pulls that info over to the 1041.  I've resorted to doing the Schedule E, Grantor Letter, and depreciation schedule manually offline and then just including the Sch E and Grantor Letter as .pdf attachments to the return.  Haven't had any issues with the IRS accepting the returns.

It shouldn't work this way, but I haven't found how to keep the 1041 from getting the data and didn't get any resolution when I posted a similar question to yours.  Hope this helps.

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swongtax
Level 4

Thank you for your response! 

The Grantor trust that I have been handed with a statement and a Schedule E, specifically the Schedule E needs to go on the Grantor/Taxpayer's individual income  tax return.  This Grantor trust was created as one of the grantors passed away, so in doing this trust, the FMV of the rental was stepped up 100% (as I was told).  My question is the CPA omitted the Depreciation figure from the Schedule E, but on the statement to the Grantor, it does say to include the Depreciation number on the Grantor/taxpayer's return.  This point is confusing me.  I looked at the State Grantor trust tax return, and the state one does have the big depreciation number on the state schedule E.  I am confused as to why the CPA would leave out the Depreciation on the schedule E attached right behind the statement of the Grantor Trust.  Any ideas/advice?

 

Thank you!

 

SW

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davetodd11
Level 5

Your situation is a little different than mine, because the grantor on the return I do is still alive and the rental property ownership is split between the grantor personally and their trust.  All income and expenses go onto the Schedule E - including depreciation.  For me, that's typically one of, if not the, biggest expense items, so I'm not sure why someone would leave that off the schedule.

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Accountant-Man
Level 12

MOST GT's do not even file a return, and everything goes on the 1040. If you didn't file the GT 1041, as everyone says the 1041 is blank with that wording.

So if you didn't bother to file the 1041, you would put I&D on the 1040 Sch B and the rental on the 1040 Sch E.

I would not put the rental on the 1041, just on the 1040-E.

** I'm still a champion... of the world! Even without The Lounge.
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swongtax
Level 4

The Grantor Trust has an EIN and needs to file Form 1041 per IRS instructions. The CPA actually actually filed the blank Form 1041 with an attached statement to the Grantor and a Schedule E with NO depreciation number, yet on the Statement, it states to report all income and depreciation on the Grantor's individual income tax return.  This is what is confusing me!  Do I include the depreciation on the Schedule E or not (on the Grantor's personal tax return)?

 

A little Background: the Grantor's husband created a Rev Trust to hold the Rental property immediately before he passed away.  After he passed away, the rental property received 100% step up basis (as I was told).  The Grantor, surviving wife, somehow now became the Grantor and Trustee, and now needs to file Form 1041 for the Trust (as well as report the rental on her individual tax return just like before the Rental was transferred to the Rev Trust).  I guess the whole point of the Trust was to get the step up basis and increase the depreciation because the property was completely depreciated prior.  Not sure. 

 

Please help with this question if you can.  I am not sure what to do with the stepped up depreciation number, include it or not on the Grantor's individual tax return Schedule E?


Thanks so much!

SW

 

 

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MICHAELMARS
Level 5

Just file the grantor trust and put on the grantor's letter. "all information will be reported by the grantor, ss#".

I have been doing this for years.  Grantor trusts are the worst part of proseries.   Even the letter is limited to number of  lines if you do wish to include all the items.  Other software, you enter like any other return and it pulls the info to create the letter.

swongtax
Level 4

The Grantor trust has been filed by an experienced CPA who charged the taxpayer over $1000.

My question is in regards to the taxpayer's individual income tax return:

I need to include Schedule E for the rental property from the Trust (taxpayer had this rental property as part of her tax return before her husband passed away which was completely depreciated).  The issue is the CPA indicated on his statement that income/expenses/and depreciation are to be included on the taxpayer's income tax return, correct, but he also included a Schedule E with no depreciation number. The Trust State return included a Schedule E with a stepped-up depreciation number (state has a statement that says the depreciation is different from the Federal ...why?)

Thank you!

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davetodd11
Level 5

The grantor trust I do the returns for owns a portion of the rental property, and the grantor owns the remainder.  I divide up all income and expense (including depreciation) based on the partnership share %'s for each and generate a Schedule E for each to reflect their portion.  The trust's Sch E gets filed with the 1041, and the grantor's Sch E and Grantor Letter get filed with the grantor's 1040.  The depreciation should always be included.

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