While everyone else is concentrating on the FTHB Credit let's talk trust income. Unless it is invested 100% in muni bonds or something how can it be non-taxable? I guess it could be taxed to the parents and the amount your client gets is a gift. The amount she is calling alimony, on the other hand, sounds a lot like a property settlement.
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Trust Income
What she is telling me is that the trust doesn't give her anything like a K1 or 1099 and that its tax reporting is handled by her parents possibly with a tax adviser who may well be extremely qualified. I don't handle trusts because I know little about them and care even less so my position if queried by the IRS or NCDOR would be that I reasonably believed what she said about her trust because I know nothing about trusts. This is in contrast to what the situation would be if she told me that she had employment income but it wasn't taxable.Comment
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