Trust election pros and cons

[Got2csun]

Client's mother passed on 12-19-07. Her parents had a rev fam living trust for 10+ years. Father died in 2005. Form 1041 was never filed because the trust was a grantof type. Prior to mother's death, client and her bother were named successor trustees and a TIN was gotten for the trust, also the trust took on a different name. Some stocks were sold under the trust's number at a gain of $34000. Stocks were sold before mother's death but were not included in her 1040. There are more assets in the trust and hopefully all will be diposed of during 2008. Should a section 645 election be used here? What are the pluses and minuses for making this election?
Also I attempted to file an extension for this trust but the provided info did not have the correct rename and the extension was rejected...Of course the e-postmark is on the 15th but now my software (ATX) will not let me recreate the extension efile. And is it too late to file Form 8855 to elect to treat this trust as an estate?

Thanks John

[Burke]

Why was an EIN obtained for this trust? Was it still a family rev living trust? If so, the stocks should have been sold in mother's name and SSN. The primary purpose of this type of grantor trust is to avoid probate. Usually the assets are distributed directly to the beneficiaries in their names as provided in the will or trust agreement. If they are not distributed, the 645 election just makes things simpler by reporting the "trust" income after date of death on the estate 1041.

[Got2csun]

Thanks for the reply, Burke
The EIN was applied for by the attorney, I guess because there are two successor trustees and the changed trust was to be used for the splitting of the assets. I have read the amended trust document when the father died in 05 and at that time all assets were just the mothers...(and all stocks had a stepped up basis.) The amended document does not address the finality of the trust and I have yet to see any documents re this final change. The original trust did have an EIN but it was never used. Yes, the trust remains a rev living trust with the addition of the successor trustees.

At the time of the mother's death should not the stock bases be stepped up again? and because they were sold before her death do I have to use the 05 stocks bases step up?
Does doing the 645 election allow the two year period to dispose of the assets and just file a sinlge return?

[Got2csun]

I'm adding to this to bring it to the top...anyone know if it's too late to file form 8855 to invoke sec 645 for this rev living trust?

[dwert]

dwert

Yes an election can be made by the due date of the ESTATE'S initial income tax return (which if you used the maximum of 12 months - the first year end would be November, 2008 and due date would be March 15, 2009). But before making one more move you must read and understand completely the trust document (or have attorney translate), something just doesn't sound right with the actions taken since the father's date of death. First of all most trusts will protect each grantor's lifetime exemption, which would have required a splitting of some assets from the "joint life trust" at his death into an irrevocable trust for his assets and her assets would remain in the "family" trust with the revocable features.

[Got2csun]

dwert: thanks for the input. My understanding from reading the original trust document is the trust has remained a revocable living trust. Following the father/husband's death the trust changed in name to the mother/wife's only fam. liv trust. In this sense it remains a revocable trust now with successor trustee names added. My client tells me most of the assets have now been sold and some were sold at losses, using stepped up bases from the 2005 death of the father (she thinks). With the election the losses and the gains can be offset to reduce the tax to the trust/estate; don't you agree? As far as I can discern there is not any part of the trust that is irrevocable. John