Daughter paid from father's trust

[oceanlovin'ea]

Susie moved her parents from their home in Arizona to Florida. Mother went to a nursing home and father stayed with daughter and her husband until such time as he could also go to the same facility.
Parents owned property in Arizona and had income of their own. They had a trust set up.
Father receives VA benefits. When Susie and her brother met with VA representatives, they were told that for father to continue to get his VA benefits, they would need to pay out money and they suggested that Susie be paid a sum each month to cover expenses of father living with them. She was told to keep track of all that she spent on him. She was told to take their food bill, mortgage payment, utilities, cable, etc and divide in thirds and claim that against what she was paid.

So I am not sure how to handle this. Trust paid her. Brother handles the money of the trust. There was no 1099 issued.

This is not self employment income. But would I put the net of the money received minus what they spent on line 21? They do not itemize deductions so there is no schedule A. But it doesn't seem right to put money spent on Schedule A anyway?

Or am I way off base with all of this?

Help please.

Linda, EA

[taxea]

Susie moved her parents from their home in Arizona to Florida. Mother went to a nursing home and father stayed with daughter and her husband until such time as he could also go to the same facility.
Parents owned property in Arizona and had income of their own. They had a trust set up.
Father receives VA benefits. When Susie and her brother met with VA representatives, they were told that for father to continue to get his VA benefits, they would need to pay out money and they suggested that Susie be paid a sum each month to cover expenses of father living with them. She was told to keep track of all that she spent on him. She was told to take their food bill, mortgage payment, utilities, cable, etc and divide in thirds and claim that against what she was paid.

So I am not sure how to handle this. Trust paid her. Brother handles the money of the trust. There was no 1099 issued.

This is not self employment income. But would I put the net of the money received minus what they spent on line 21? They do not itemize deductions so there is no schedule A. But it doesn't seem right to put money spent on Schedule A anyway?

Or am I way off base with all of this?

Help please.

Linda, EA

If she is a paid caregiver then a 1099 should be issued and a Sch C prepared.

[DexEA]

I don't think it is income, but

if it is it appears to be a reimbursement of expenses rather than income. If reportable income, sounds more like Schedule E for rent and related expenses than a Schedule C.

[Koss]

Paid caregiver?!?

The original post makes no reference to the daughter providing services for compensation. It says the daughter was paid for things like food and utilities...

The reference to the mortgage payment implies that the father's funds were also used to pay some kind of RENT.

This is NOT self employment income. The daughter may have some rental income.

Reimbursement for the father's share of food and utilities may not be income at all.

BMK

[oceanlovin'ea]

The money was spent on personal items that were needed, She also had to take them to doctor's appointments and to the nursing home to see his mother. She said she was driving him somewhere every day. They had to do some modifications to the room he was in but it did not increase the value of the home.

He is now in the same facility as his wife. I think he went there in February. Now I am assuming the cost of the nursing home will take care of the VA benefits. So this is a one time shot.

When I deduct all the expenses, she has about $4000 more received than expenses.

Linda, EA

[Burke]

The money she received was paid from the trust, you said. But there is no indication what kind of trust this was. If it was a revocable living trust, it is disregarded as an entity and any income attributable to the assets in the trust is reportable on the parents' return.

If it is an irrevocable trust, then either the trust would pay the taxes, or the beneficiary of that trust would have taxable income to the extent of those distributions, (because this is what these monies are) if the trust had taxable income. A K-1 would be issued to that beneficiary if taxes are to be paid by the beneficiary. In this case, it appears distributions were made from the principal, but the trustee would have to advise you on that score.

Regardless, in either case there is no taxable income to the daughter, as it does not appear she is a beneficiary of that trust. Again you would have to verify that with the trustee.

[oceanlovin'ea]

I will ask to be sure but I think it is a revoccable trust. Her dad is mentally in good shape. Her mother was the one who was in need of care and he couldn't do it by himself any longer.
Son and daughter both live in same city so it made sense to move them here. Son did his dad's tax return which tells me it is just a personal 1040 return.

When her parents die her and her brother will be beneficiaries of the estate. But they don't get anything now.

This was just a situation of the VA saying keep his money spent so his benefits won't be dropped. I think they had to wait for a opening in the facility the wife was in for him to be able to get in there. She went in from hospital.

Linda, EA

[Burke]

So these are treated as distributions on behalf of the beneficiary, even though they were made to someone else.