Simple 1041

[RitaB]

Yes, Ma'am

Hey, I'm going to be in TN in July for Appalachia Service Project. But, we don't drink while on the trip. I heard that sweet tea is the table wine of the south, anyway! Can I find UNsweetened iced tea in TN?

You surely can, Miss Rita L. Heck yeah.

[Burke]

I will NEVER say "simple" and any kind of tax return ever again. Ever. Again.

At least, now that you know, it will work out better for the heirs since it will go on the final 1040. You'll be a hero!

[Possi]

The real heros....

.... are YOU! Thanks for helping me!

[BHoffman]

Speaking of easy 1041 returns - I'm preparing my first one

I think 2014 is OK. It's small, all of the information is correct, and the Trust is paying the tax on the little bit of taxable income so nothing is passing through to the beneficiaries' K-1 forms.

My question is this: There will be expenses but no income for the Trust during 2015. Can those expenses be passed through to the beneficiaries' K-1 forms in 2015, even though no income/expenses were passed through to them in 2014?

The Trust document leaves all of the tax decisions up to the Trustee. Pretty sure she's going to want to do it that way for the final 2015 Trust return.

Thanks!

[Burke]

A trust or estate, if it has expenses in its final year may pass them through to the beneficiaries according to their percentage of interest on the K-1's.

[BHoffman]

Is the 2015 return the final return for the Trust, where distributions will be made to the beneficiaries? If not, there is nothing to pass through to them. If the trustee has discretion (and sometimes even if it is not explicitly given in the trust document) the trustee can make the election to designate capital gains to the bene's, not the trust, so that the taxes will be more favorable. But that only happens if there is capital gain income.

The Trust will be distributing everything in 2015. There will be no capital gains. The only income will be a little bit (maybe $20) of bank interest.

The Trustee converted everything to cash during 2014. We expect there will be my fee for preparing the 2015 form 1041, and some legal expenses for transferring the title for some land, and those will be the only expenses in 2015.

I guess I'm afraid of looking at some sort of NOL in 2015 for the Trust and not knowing what to do about that.

[S T]

2015 Final Year you will note on the 1041, if negative due to expenses versus income, you will pass through via K-1 beneficiary which will be a code A excess deduction on termination. No NOL

Sandy

[BHoffman]

Burke and ST to the rescue

Yay! I just did a dummy trust return for practice and looked up on the interwebs that the excess deductions flow through in box 11, code A, and are deductible on bene's Sch A with the 2% haircut. Marked the dummy return "final" and the K-1 looks just like it should.

Thanks!!

[S T]

Burke is way more versed at Trusts and Estates and I have learned from him with the information that he shares. Yes, that is the way it is done on a Final 1041 !

Sandy

[BHoffman]

Whew! Sandy, you know this trust has been a real learning experience and thank you for helping me! I'm ready for some fine Tennessee sippin' whiskey mixed with some sweet tea