assisted living agreement - Sched c or sched e?

[ATSMAN]

Just to throw in another issue. I have one client whose aged mother needs assistance and the way their attorney worked it out was to have the mom's assets (sale of her house, and bank/brokerage accounts) transferred to a trust. The trust pays the necessary expenses for the upkeep of the mother.

The assets in the trust are dwindling and if she goes to a nursing home after the "claw back" period expires it may be worth it!

[Burke]

I hope it was an irrevocable trust.

[Burke]

I guess I am not seeing why my client should get a w-2 and be treated as a household employee when this is all happening in my clients house.

I kind of agree with that. It got turned around in my overstretched brain, and I was thinking daughter was performing services in Mother's house, not the other way around. To revise my opinion, I would treat the services as income on Line 21. I would do a Sche E for the rental income, but only to the extent of income - less expenses - down to zero. No loss due to not-for-profit activity. And this is only because they set it up legally like this. I am sure the reasoning is the Medicaid angle.

[TAXNJ]

Yes

I hope it was an irrevocable trust.

Agree and that is why the Original Poster should wait until the Original Poster gathers all the facts and also talk to lawyer who set up the agreement (hopefully the person was a tax attorney), then the Original Poster would know what the planning purpose intent was.