Estate or Trust?

[JoshinNC]

OK, this may be a dumb question.

My client is the income beneficiary of a QTIP trust which was created in the will of her late husband. The husband died on 7/26/05. There was an Estate return completed for the year ended 6/30/2006. Most of the assets were transferred into the trusts set up in the will. Today we received a 1099-int in the name of the estate for interest accrued on a money market that was transferred into the trust for 2006 earnings. The closing letter from the IRS for the estate has not yet arrived.

Is this income attributable to the estate, with a return due or does it get attributed to the trust which owns the money market? Does this bank need to be notified that the trust owns the money market? Am I loosing my mind this early in the season?

[Gretel]

First thing, I would call bank if money market was transferred to trust. Very likely they either never got info for trust or simply didn't transfer. If accrued interest was trust asset, no matter what 1099 says, I would report under trust with explanation.

[fliszt]

And

give the bank the trust's EIN so they may do a 1099c. If they won't, then report it under the S/S# and an attached letter stating here's why and be sure to give the IRS both s/s# and EIN.

[Bucky]

Report it as interest income from the trust. On the sch B just put the financial institution along with the estate id number. File it. Move on. Of course notify the bank for future years.

[OldJack]

In as much as the assets were transfered to the trust by a will, you should look to the probating of the will. The probate court's determination of the assets in accordance with the will would be the date the assets transfered from the estate to the trust. Interest before the transfer date belongs with the estate and after to the trust.

[JoshinNC]

Thanks all!

I agree with your premise Jack, that the income derived post probate is trust income.

The biggest problem is that the bank that has the money market is also the trustee of the trust!

What a mess.