Trust and 1041 Tax Return Question

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Jungle Cat
Posts: 119
Joined: Wed Apr 30, 2008 7:56 am
Location: Massachusetts

Trust and 1041 Tax Return Question

Post by Jungle Cat »

My parents have a trust that was created many years ago and I am the trustee. Trust was not funded until recently. House was put in the name of the trust in August 2020 and I need to change my mother’s Fidelity Taxable account to the Trust’s TIN. I applied for the TIN from the IRS today which was very simple; and put December as the end of year for the accounting period.

The only part of the process that surprised me was in the IRS letter it stated:

1. Based on the information received from your or your representative, you must file the following forms by the date(s) shown: Form 1041 6/24/21
2. After our review of your information, we have determined that you have not filed tax return for the above-mentioned tax period(s) dating as far back as 2021.
3. Then it mentions I should file the return by 7/9/21.

My understanding is a 1041 tax return is not required unless the trust earns more than $600 worth; which it has not.

Thus, do I need to file a 1041?
Gill
Posts: 8221
Joined: Sun Mar 04, 2007 7:38 pm
Location: Florida

Re: Trust and 1041 Tax Return Question

Post by Gill »

What type of trust is this, I.e., revocable trust, irrevocable trust, defective irrevocable trust, etc.? Why was the trust never funded until recently? Who is the beneficiary?
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
bsteiner
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Joined: Sat Oct 20, 2012 9:39 pm
Location: NYC/NJ/FL

Re: Trust and 1041 Tax Return Question

Post by bsteiner »

The threshold for trusts is $600 of gross income or any taxable income.

However, if it's a complete grantor trust (the lawyer who prepared it would have discussed this with your parents), it could use the social security number of one of them under Treas. Reg. § 1.671-4: https://www.law.cornell.edu/cfr/text/26/1.671-4: https://www.law.cornell.edu/cfr/text/26/1.671-4.
Topic Author
Jungle Cat
Posts: 119
Joined: Wed Apr 30, 2008 7:56 am
Location: Massachusetts

Re: Trust and 1041 Tax Return Question

Post by Jungle Cat »

1. It is an Irrevocable Trust my parent's created. They were the beneficiaries.
2. My mother is the only beneficiary as my father is deceased
3. We thought it was funded in 2003 (with the house being put under the name of the trust). Came to find out it was not done properly at the County so we got that straightened out with them August 2020
4. Last year we put my parents taxable Fidelity account in the name of the trust and I used the grantors SSN. It was my understanding we could use my mother's SSN but perhaps I was mistaken. We did report the taxes from that account on her 1040.
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