K-1 issued to an Irrevocable Trust EIN reporting

[MikiD]

Hi,

A client received a form K-1 from a partnership that generated rental income. The K-1 is issued to the client's irrevocable trust EIN and not his social security number. Can I report the K-1 on the 1040 return, or do I have to file a trust return and then have the new trust K-1 to import into the personal 1040? The reportable income is not going to change...

Thank you

[BobKamman]

Eventually the IRS is going to be looking for a 1041 from that trust, if it has an EIN and is receiving income (of more than a small amount).  The trust may actually be a grantor trust, but still need to file.  First step:  Get a copy of the trust from the client.  While you're at it, figure out if they have any clue about what they were trying to do here.  

[sjrcpa]

The partnership got that EIN from your client.

If it is a grantor trust, either they did not tell the partnership or the partnership prepared K-1 Part II incorrectly.

If it isn't a grantor trust, a 1041 may be in order.

[IRonMaN]

"The reportable income is not going to change..."

Not necessarily.  If the trust income wasn't distributed to the beneficiary, the income is going to stay within the trust and the trust will pay the tax ------------- assuming you really have an irrevocable trust.

[MikiD]

Thank you all for responding. I've made the additional requests and questions to the client, and will circle back once I get the answers 

[qbteachmt]

"the client's irrevocable trust EIN and not his social security number. Can I report the K-1 on the 1040 return"

Keep in mind that the reason someone forms an irrevocable trust will include that its holdings are separated from the self. It's similar to how you find your "self-employed corporation" clients might tend to commingle financial activity. They/you need to honor that separation. A revocable trust is a bit different and is not by default its own separate entity. There are tax treatment reasons and there are legal reasons (such as holding title to deeded real property). If you are going to have clients with trust activities, you will want to understand these details. Often, what the taxpayer thought they were doing, and what got put into place, are not the same. That's why you get the paperwork and don't just listen to what they tell you.