1041 Required, necessary or helpful

[Treasur2]

TP and SP setup living trust 1996. TP died in 2014. SP died 01/10/18. Total assets were approximately $650,000. Including primary residence. Beneficiaries are 4 adult children. All get along fine. One of the children is the personal representative. Will is a pour-over will only. Third oldest is my client.

Total income for trust in 2018 is less than $100.

Second oldest lives in residence rent free. Is carpenter by trade. He is making minor "improvements" and "maintenance" to home to ready for sale in 2019. Again residence is generating no income. Property taxes and above maintenance are being paid from cash assets in the trust. I am very confident no basis was established on the date of death. Should it have one?

Must trust file 1041?

if not need to, should it? So k-1's can be sent to recorded and sent to beneficiaries?

Since it's not run as an income producing asset. No expenses can be taken is my opinion. agree/disagree?

If no 1041, and no K-1's are issued. What risks to beneficiaries. help me with worst-case scenario stories, please.

There was an IRA. Sound like beneficiaries have taken part of it for each. Left the remainder in the trust (no I don't know the named beneficiary....yet.....of the IRA). To pay the above expenses.

Yes, there are many other issues here. But what I'm asking about is the necessity, benefit of filing 1041. When income level is well under $600 limit. Very simple estate. But...living trust is a small wrinkle.

[New York Enrolled Agent]

Total income for trust in 2018 is less than $100.


Must trust file 1041?

The answer to that specific question is found in §6012 with respect to the requirement to file a return.

(4)

Every trust having for the taxable year any taxable income, or having gross income of $600 or over, regardless of the amount of taxable income;

[Burke]

If the IRA had individuals named beneficiaries, then it should have been paid to them outside the trust. If that is the case, what type of income is the $100 you mention?

[Dude]

I guess the first step is to see if the trust allows for discretionary distribution by the trustee or if the trust requires equal distribution. Discretionary distribution would allow for the trust to retain some assets that high income beneficiaries do not want to include in income.

[Burke]

Keep in mind that a trust is required to either pay the tax on any taxable income or pass it through to the beneficiaries to be taxed on their returns if distributions are made. In other words, the trust cannot distribute non-taxable income first, if it distributes anything.

[Treasur2]

Yes, there is the way a trust is supposed to be run, per the law. Then there is the way it is, ran. By the trustee. Unfortunately, there is no automatic guidance unless the trustee seeks it out in advance. Thanks to all.