What happens to loss?

[Treasur2]

A revocable trust is started in 2001. Real estate vacation home is placed in trust. Grantor dies 6/22/04. Irrevocable trust begins

The trustee is sp. Beneficiaries are children of deceased (sp is 2nd marriage) from first marriage. Real estate is sold at a loss in trust. Trustee is counseled that with beneficiaires (two) can authorize the closing, ending of the irrevocable trust. Without any money being disbursed to them the beneficiaies. instead can go to spouse/trustee. Beneficiaires sign estate attorney drawn up document to that effect.

What, if anything can be done with loss from irrevocable loss.

[ATSMAN]

A revocable trust is started in 2001. Real estate vacation home is placed in trust. Grantor dies 6/22/04. Irrevocable trust begins

The trustee is sp. Beneficiaries are children of deceased (sp is 2nd marriage) from first marriage. Real estate is sold at a loss in trust. Trustee is counseled that with beneficiaires (two) can authorize the closing, ending of the irrevocable trust. Without any money being disbursed to them the beneficiaies. instead can go to spouse/trustee. Beneficiaires sign estate attorney drawn up document to that effect.

What, if anything can be done with loss from irrevocable loss.

I believe the practical effect of the modification of the trust document making the beneficiaries waive their share of any distributions, and making the spouse receive all the distributions, makes the loss go on the K1 issued to the spouse.

Are you responsible for the trust tax filing? Have you seen all the trust documents, including the modification?

[Treasur2]

I believe the practical effect of the modification of the trust document making the beneficiaries waive their share of any distributions, and making the spouse receive all the distributions, makes the loss go on the K1 issued to the spouse.

Are you responsible for the trust tax filing? Have you seen all the trust documents, including the modification?

No I am not responsible for trust tax filing. Yes I have seen all trust documentation including meeting with and discussing trust with attorney (estate specialist from same firm who drew up original and 2 revisions of revocable trust document). I have been assisting "sp" with her 1040 since 2008. So I know history, family relationships, etc. Makes me comfortable with all.

The educational thing I learned here was how a irrevocable trust could be closed or terminated other than per the document instructions. I did not realize how easy it was from a mechanical standpoint. Then, like everything else, I said "of course" to my self. The two parties of an agreement (trustee and beneficiaries) simply have to agree....in writing.

[Burke]

You call this a real estate vacation home, but you don't say whether it was for personal use or whether it was rental property. It got a stepped up basis in 2004 when grantor died. That was more than 13 years ago. What happened after that? Was it rented out or used for personal use? If it was not rental property after 2004, then there is no loss to be deducted. Just because it is in a trust does not change the character of its usage or generate a loss (unless it was sold shortly after death of the grantor.) If the beneficiaries disclaim their interest in the trust, then what does the trust document say about contingent benes? If nothing, ownership goes to their heirs, not the spouse, unless he is also named as a beneficiary. Still, no loss passes through for personal use property.

The property can be sold and the trust terminated if it had title to no other assets, as you say, easily enough if all benes agree. If this WERE rental property after 2004, then that is another matter and a loss might be deducted. The trust became irrevocable at death of the grantor in 2004. After that, it could not be changed, although you mention "modification of the trust document." When was it "modified.?"