Which returns to file?

[RightOn]

Client's mother passed away in 2015. His mother had a living trust when she left and her only asset is a rental property. At the present time, the rental property is still in the process of being transferred into a family trust.

I think the rental activity is to be reported in an estate tax return for year 2015 since the rental property had not been transferred into the trust.

As for year 2016, let's say the transfer process will be completed on May 1st 2016, the rental activity is to be reported in the estate tax return for the period Jan.1st to Apr.31. And the rental activity is to be reported in the trust tax return from May.1st onward.

Am I getting it right?

[ATSMAN]

I am assuming the Living Trust held the title to the property?

Once the grantor died the living trust became irrevocable and will need a EIN and file the trust return showing income and expenses of the said property.

[Burke]

The living trust became irrevocable when she died, so the property is still inside that same trust, not part of the estate. However, there is a special treatment available called a 645 Election (code section) which allows the estate and trust income to be combined as one on the estate tax return. It's only available for the first two years. Note, however, that it requires the DNI to be calculated differently. See instructions for Form 1041, page 19 and Form 8855.

[RightOn]

Thank you. So if it is an irrevocable trust, even if the rental property has not been transferred into the trust, the rental activity would still be filed in a trust tax return. Have I understood it correctly?

But is there any chance that it is a revocable trust instead of an irrevocable one?

[Burke]

Thank you. So if it is an irrevocable trust, even if the rental property has not been transferred into the trust, the rental activity would still be filed in a trust tax return. Have I understood it correctly?

But is there any chance that it is a revocable trust instead of an irrevocable one?

You say "even if the rental property has not been transferred into the trust...." Are you saying the original living trust (which is the term for a revocable trust) did not have title to the property at the time she died? A living trust is set up while the grantor is living, but it requires that assets be titled into that trust either during that time or by the terms of the will. The trust became irrevocable at her date of death, so there is NO chance it is still a revocable trust, as she is not around to revoke it. You mention in another part of your post about a "family trust." Is this a different document? Did the terms of the will instruct that the property was to be transferred into the trust if it was not previously titled that way? Also, do you have the trust document? You are going to need it. Also, see my post above about the 645 election. It may not be necessary to do separate returns for the estate and trust.

[ATSMAN]

Thank you. So if it is an irrevocable trust, even if the rental property has not been transferred into the trust, the rental activity would still be filed in a trust tax return. Have I understood it correctly?

But is there any chance that it is a revocable trust instead of an irrevocable one?

RightOn you need to give the facts accurately. Based on your OP we were led to believe that the living trust held title to the rental property.

Currently who holds title to the property? The deceased person in single name or Jointly? Is there a will what does the will stipulate?

Need more accurate facts to give a better answer my friend!

[RightOn]

Sorry, but the situation is quite confusing.

The son said the property was held under the name of the Family Trust when his mom passed away.

Then he said, "We are in the process of putting mom's property into an existing Family Trust. The title to the Deed of the Property has been changed to my name, the sole heir."

First he said the property was under the name of the trust when his mom passed away. But then he said they are now in the process to put the property into the trust, which implies that the property was not in the trust when his mom passed away. Therefore, based on what he said, the title of the property was held under the name of the trust while the property was not in the trust when his mom passed away.

Is anyone able to make out the situation?

[ATSMAN]

Sorry, but the situation is quite confusing.

The son said the property was held under the name of the Family Trust when his mom passed away.

Then he said, "We are in the process of putting mom's property into an existing Family Trust. The title to the Deed of the Property has been changed to my name, the sole heir."

First he said the property was under the name of the trust when his mom passed away. But then he said they are now in the process to put the property into the trust, which implies that the property was not in the trust when his mom passed away. Therefore, based on what he said, the title of the property was held under the name of the trust while the property was not in the trust when his mom passed away.

Is anyone able to make out the situation?

I hate to say it but it is still confusing because you say, " Therefore, based on what he said, the title of the property was held under the name of the trust while the property was not in the trust when his mom passed away." "The title to the Deed of the Property has been changed to my name, the sole heir."

Something is not adding up. Find out if Mom owned the property under her own name and then when she died the heir good the deed changed to his name after probate?

Now he wants that back in some trust?

[taxea]

Before anything is decided you need to read the trust. It is possible that the trust was revoked on death and property transferred to trustee who hold the POA. What family trust is it being transferred to? The deceased or the beneficiary. Be sure, what ever else, that an appraisal is done on date of death. Read the trust and go from there. Depending on the value of the assets and if there was income after death a 1041 and 1040 may be appropriate.

[Burke]

Sorry, but the situation is quite confusing.The son said the property was held under the name of the Family Trust when his mom passed away. Then he said, "We are in the process of putting mom's property into an existing Family Trust. The title to the Deed of the Property has been changed to my name, the sole heir."

First he said the property was under the name of the trust when his mom passed away. But then he said they are now in the process to put the property into the trust, which implies that the property was not in the trust when his mom passed away. Therefore, based on what he said, the title of the property was held under the name of the trust while the property was not in the trust when his mom passed away.
Is anyone able to make out the situation?

No one is going to be able to make out this situation, until and unless, for the umpteenth time, you get the Trust document. The original one that the Mom signed. AND the deed, which would indicate whether or not the property was ever titled to said trust. It is also possible, that the will (if any) had a "pour-over" clause which would have swept up any untitled assets and deposited them into the trust. SO you need that too.

If property was never transferred to original Trust, and there was no such clause in the will then the property passed to the estate or whatever the will said regarding it. And the estate reports the rental income. If there was NO will, then it passed by operation of law to the heirs, of which you say there is only one. So that would make sense since he says it is now in his name. If that is the case, HE reports the rental income on his own tax return.

[taxea]

Listen to Burke! Get the trust and the deed before you do anything. Perhaps a conversation with whomever is transferring the property may be in order also.