Parents set up a Simple Educational Trust several years ago. The Trust and Beneficiaries are PA residents. When I took over the return from another preparer a few years ago the Trust only had interest earnings from savings accounts. The interest earnings were passed through to the beneficiaries for income tax purposes.
Now the new twist…… The Trust purchased rental property in NY.
Am I correct in my thinking that …..
I know I prepare a NY non-resident Trust return for the rental property and the rental profit is passed through the K-1 to the beneficiary. The beneficiary will then prepare a NY-non-resident return to claim the rental profit and will of course get credit on his resident PA return for any taxes paid to NY.
I know I prepare a PA resident Trust return for the interest earnings from savings accounts and that is passed through to the beneficiary to claim on his resident PA return.
My question now is ….. I do NOT put that rental income on the PA resident Trust return do I ??? If I did then it would be doubled on the beneficiary PA resident return right?
So is my brain thinking correctly that I only claim the rental income on the NY non-resident Trust return that is passed through to the beneficiary.
We are used to always preparing a non-resident return and taking credit for taxes paid when claiming that same income on the resident return. But that wouldn't work here.
Hey … I just answered my own question I think. Because it is a pass thru … there is no tax paid to NY by the Trust therefore no credit for tax paid to NY on the PA return which then means that the Trust does not have to do a PA return (in regards to the NY rental). RIGHT ??
I prepare a NY non-resident Trust return for the rental.
I prepare a PA Trust return for only the savings account interest.
Then when the beneficiary receives the K-1's. He/She will do a NY-non-resident and pay the taxes to NY on the rental and get credit to his resident state PA for the taxes paid to NY, plus he will claim the interest from the PA K-1. (BUT) Will PA wonder why there is no claiming of rental property on the Trust return when they see Federal ???
Now I am confused again *sigh*
Smack some sense into me will you please !!!!!!!!!!
Thanks for your wise answers …..
Now the new twist…… The Trust purchased rental property in NY.
Am I correct in my thinking that …..
I know I prepare a NY non-resident Trust return for the rental property and the rental profit is passed through the K-1 to the beneficiary. The beneficiary will then prepare a NY-non-resident return to claim the rental profit and will of course get credit on his resident PA return for any taxes paid to NY.
I know I prepare a PA resident Trust return for the interest earnings from savings accounts and that is passed through to the beneficiary to claim on his resident PA return.
My question now is ….. I do NOT put that rental income on the PA resident Trust return do I ??? If I did then it would be doubled on the beneficiary PA resident return right?
So is my brain thinking correctly that I only claim the rental income on the NY non-resident Trust return that is passed through to the beneficiary.
We are used to always preparing a non-resident return and taking credit for taxes paid when claiming that same income on the resident return. But that wouldn't work here.
Hey … I just answered my own question I think. Because it is a pass thru … there is no tax paid to NY by the Trust therefore no credit for tax paid to NY on the PA return which then means that the Trust does not have to do a PA return (in regards to the NY rental). RIGHT ??
I prepare a NY non-resident Trust return for the rental.
I prepare a PA Trust return for only the savings account interest.
Then when the beneficiary receives the K-1's. He/She will do a NY-non-resident and pay the taxes to NY on the rental and get credit to his resident state PA for the taxes paid to NY, plus he will claim the interest from the PA K-1. (BUT) Will PA wonder why there is no claiming of rental property on the Trust return when they see Federal ???
Now I am confused again *sigh*
Smack some sense into me will you please !!!!!!!!!!
Thanks for your wise answers …..