Trust/Estate Problem

[Kram BergGold]

I just picked up a deceased client who by the instructions of a will was supossed to move two pieces of real estate (one rental, one was a second home) into a trust but never did it. 1041 forms were filed for 2004 and 2005 as if she had titled them to the trust. In 2008 the rental property was sold. No returns have bene filed for 2006 or 2007. I see two choices, file a final 1041for 2006 showing no activity and then file her personal returns for 2006 and 2007 showing all income and deductions. Option 2 is to file the 2006 and 2007 Form 1041's pretending that the real estate was transfered to the trust. However the real estate was sold in 2008 under the name of the children who inherited the rental property.
So to me option 1 is the better way to go, any comments?

[Jesse]

Option #1 sounds good because the real estate was never transfered to the trust.

Why was nothing filed in 2006 or 2007?

[Kram BergGold]

Answer

The story I hear is, the tax info got to the CPA late for 2006. Then she just never did anything.

[Roland Slugg]

Was the trust a revocable living trust ... i.e. a disregarded entity? If so, no F-1041 returns should have been filed at all, whether the real estate was transferred into the Trust or not.

If the Trust was an irrevocable Trust and there is documentation that the woman meant to transfer the real estate, but no one got around to recording a new deed, I would ask a lawyer if that constitutes a legitimate transfer. If it does, the property was owned by the Trust. If not, the property was owned by the decedent until she died.

Returns should be filed accordingly.