Trust's home

[Got2csun]

A trust is established in FL... A rev family living trust in 1996 and all income was taxed via 1040 persoan returns... Parents are now both dead. One successor trustee lives in OR the other is my client in NY..and the NY address is now the address of the trust. Does the trust have to pay NY tax? Are there IRS guidelines for the moving of the trust or does it always remain a FL trust? Thanks, John

[Burke]

What is the source of the trust's income? If it is income-producing property located in FL, then it remains FL source income.

[veritas]

Was the income

distributed?

If not it will be taxed in Oregon and New York at the trust level.

[Got2csun]

The trust is a complex trust so there is no income distribution. Source of income is stocks, bonds and CD's. Also the mother's condo in FL just sold in 09. Will any gain have to be reported or can the trust exclude because of principal resident factor? Also, some assets were sold before the mother's death and apparently were not reported on her final 1040. Should these be reported even though a 1099B was not received? These sales were in 2007 and no one can locate a 1099b for the sales...sales were 4 days before her death. The trust was established in 1996? What date do I use for the date entity created? This is the initial 1041 for this entity. Thanks for all your help..John

[Burke]

Well, this is getting a bit more complicated.
(1) Assets sold before Mother's death go on her final 1040, regardless of whether 1099B's were received. Get sales & basis info and amend. In fact, that goes for any income she may have received through the living trust prior to her death.
(2) Was Mother's condo titled to the living trust prior to her death? If not, it is part of her estate and goes through probate. Heirs per the will report cap gain/loss on their returns as investment property on Sche D. Can't use the principal residence rules if it was sold AFTER she died, whether it is in the trust or not.
(3) Do you have the trust document? You say it is a complex trust. What are you basing that on? Why is income not being distributed? What is point of trust? Most living trusts are mere vehicles to avoid probate and assets are distributed to heirs at death. Depends on what trust document says. If condo was in name of trust, then proceeds go into trust. Trust reports sale.
(4) Living trust (grantor trust) terminated on her death. Complex trust has creation date of day after death. You also need copy of will to determine how assets are passed.

[Got2csun]

Burke, thank you for your insights....the tax practioner for the mother's 2007 return told my client, the daughter, even though stock sales were made before her mother's DOD, because the trust had been existence since 1996 the sales could be reported on the trust's 08 and initial return when losses would be taken. All trust income in prior years was reported on parent's 1040's.
Also most of the assets of the trust/mother have been distributed. My client has sons going to college and she wants to keep the trust open with her share of the assets in it so she can fill out college aid forms w/o including these assets.
Does the trust have to use the calendar year or can it file for a year period beginning the day after the mother's death?
According to the trust documents the title of the trust continues to be a revocable family living trust but now has added names of two successor trustees. And apparently the condo in FL was "owned" by the trust according to the settlement statement of the sale.
Any more thoughts? Thanks John

[Burke]

1) The 2007 tax preparer is absolutely wrong on the stock sale information. It goes on the Mother's 2007 final tax return if sold prior to her death. (I assume she died in 2007.) The fact that the trust had been open since 1996 had nothing to do with it. Perhaps she misunderstood. You said he told your client it could go on 2008 trust return? Did you mean 2007?

2) Unlike an estate, the trust must use a calendar year ending on 12/31. However, for 2007 it would have a short tax year beginning with the day after Mother's death. Perhaps he was thinking about the estate which can use a fiscal year ending in 2008 if so elected. And the estate could have treated the revocable trust as part of the estate in that case, (see rules for Sect 645(a) election). What actually was done? If Mother died in 2007, estate fiscal year would have ended in 2008, and the date for filing the estate return would have passed by now. What was the date of death?

3) It appears that only one beneficiary wants to keep the trust open with her share of assets? In that case, see Sect 663(c) election on page 2 of Form 1041, for treatment of separate share as separate trust.