From schedule e rental to grantor trust rental

[tiellamo]

We have been filing our two rental properties on our personal return. We have transferred our rentals to a grantor trust. Do we now have to “dispose” of each depreciable item and close out the schedule E? When I tried that I created a huge loss.

I know that I need a K1 for reporting income and expenses but how do I calculate depreciation for the K1?

Thank you 

[jeffmcpa2010]

I would start with asking the attorney who created the trust's to find out if they are trusts which need to file their own return.

A lot of grantor trusts (think living trust) are in my experience transparent for income tax purposes.

[tiellamo]

Thank you, I have asked the attorney and he said a 1041 will not need to be filed as the reporting will go from a k1 to our personal return. Grantor trusts from what I have learned are reported this way.

[sjrcpa]

If the trust will file a tax return, on the 1040 you stop depreciating them as of the date of transfer.

This is not a gain or loss situation.

If the trust is disregarded for income tax purposes you leave everything the way it is.

[sjrcpa]

If "a 1041 will not need to be filed " there will not be a K-1.

[jeffmcpa2010]

So you ignore the trust for income tax purposes and file the 1040 just like you have been doing.