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Old 10-28-2014, 05:24 PM
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Reporting decedent's interest & dividends

A brokerage account was originally titled in a revocable living trust using the grantor's social security number. The grantor died in Sept. 2013 and the revocable living trust became a testamentary family trust. A final 1040 was filed for 2013 but the paperwork transferring the brokerage account into the family trust with a new tax id was done in Oct. 2014 by the trustee. The trustee was told that any interest, dividends or capital gains for 2014 will be reported under the decedent's social security number, not the new tax id. Is this correct and how can this be accounted for when filing a trust tax return for 2014 by April 15, 2015?



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Old 10-30-2014, 03:28 PM
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Originally Posted by FBN2014 View Post
A brokerage account was originally titled in a revocable living trust using the grantor's social security number. The grantor died in Sept. 2013 and the revocable living trust became a testamentary family trust. A final 1040 was filed for 2013 but the paperwork transferring the brokerage account into the family trust with a new tax id was done in Oct. 2014 by the trustee. The trustee was told that any interest, dividends or capital gains for 2014 will be reported under the decedent's social security number, not the new tax id. Is this correct and how can this be accounted for when filing a trust tax return for 2014 by April 15, 2015?


I believe that anything after the owner's death should be reported on the Trust and Estate Returns (Forms 1041). Here is a link to the instructions.

http://www.irs.gov/pub/irs-pdf/i1041.pdf

You can combine the Forms 1041 for the Trust and Estate, i.e. submit only one form, if you file Form 8855.



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Old 10-30-2014, 06:09 PM
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Originally Posted by Reno98 View Post
I believe that anything after the owner's death should be reported on the Trust and Estate Returns (Forms 1041). Here is a link to the instructions.

http://www.irs.gov/pub/irs-pdf/i1041.pdf

You can combine the Forms 1041 for the Trust and Estate, i.e. submit only one form, if you file Form 8855.
As you can see, for tax purposes, a revocable living trust is ignored as a separate entity and the income of the trust is reported by you on your 1040. When you open a brokerage account for the trust, you provide the institution ,on Form W-9, your name and SSN# for purposes of reporting the income of the account to the IRS. The account would be titled as, say, "Tom Johnson under trust agreement Tom Johnson Living Trust dated Dec. 28, 2013. So on. The trust should not apply for a separate tax ID #, as this will unduly complicate reporting. When you retitle the property in your individual brokerage account, you need to specify to the broker that you want to transfer the assets of your individual account to that of the trust account. Once you sell the assets to fund the trust account, then, this will obviously be a taxable event. All future gains and losses of the trust account, including dividend and interest income, will continue to be reported on your 1040 as if the trust did not exist for tax purposes. No tax return will be required for the living trust.



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Old 10-30-2014, 06:32 PM
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Wnhough,
You are misreading the scenario I presented. There is no more revocable trust, the grantor died. It is a testamentary trust now. Please re-read the question to see if you can offer any further advice. Thanks



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Old 10-30-2014, 07:11 PM
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Wnhough,
I beleive you misread my question. I am not asking about the revocable trust, the trust is now irrevocable, the grantor id deceased. Please re-read and answer if possible. Thanks



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Old 10-30-2014, 07:17 PM
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A testamentary trust is irrevocable and may be either simple or complex in its design and practice after the granto’s death;purpose is to control who receives what assets and when the beneficiaries receive the assets; even if, in general, a trust is not considered a separate legal entity, with respect to the income tax act it is. This means that a trust can earn and be taxed on its income like any individual taxpayer. The trust would file its own return,which is a T3, and receive its own tax bill. A testamentary trust’s fiduciary retains responsibility for filing the trust’s federal taxes and for issuing the relevant paperwork, including Sch K-1, to the trust’s beneficiaries. Only the trust’s trustee may sign tax returns filed on behalf of a testamentary trust. Most trusts are different than other taxpayers in that they do not pay taxes at graduated rates. Instead, they are taxed on their income at the highest marginal tax rate, even if they have very little income to prevent the use of trusts as income splitting tools. Testamentary trusts, however, continue to enjoy graduated tax rates. This basis of taxation permits income splitting, as income payable to the beneficiaries can be retained and taxed within the trust at the same graduated rate structure as is available for a living individual.So, a testamentary trust needs to file a federal tax return, Form 1041, aslong as it has any taxable income, I mean if it has a gross income exceeding a certain amount . I guess if its gross income is $600 or more. The IRS taxes a testamentary trust in a manner similar to how it taxes individuals. In addition to the credits and deductions available to individual taxpayers, the IRS permits a testamentary trust to deduct any amounts paid to a trust’s beneficiaries from its federal taxes, however. As a result, a beneficiary is responsible for paying federal income taxes on the funds he receives from a testamentary trust.



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Old 10-30-2014, 09:38 PM
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Yes, I understand how to report the trust income but how do I account for the fact that the brokerage firm is telling me that they will issue a 1099 to the decedent's social security number and not to the trust's tax id number?



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Old 10-30-2014, 10:33 PM
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Originally Posted by Wnhough View Post
A testamentary trust is irrevocable and may be either simple or complex in its design and practice after the granto’s death;purpose is to control who receives what assets and when the beneficiaries receive the assets; even if, in general, a trust is not considered a separate legal entity, with respect to the income tax act it is. This means that a trust can earn and be taxed on its income like any individual taxpayer. The trust would file its own return,which is a T3, and receive its own tax bill. A testamentary trust’s fiduciary retains responsibility for filing the trust’s federal taxes and for issuing the relevant paperwork, including Sch K-1, to the trust’s beneficiaries. Only the trust’s trustee may sign tax returns filed on behalf of a testamentary trust. Most trusts are different than other taxpayers in that they do not pay taxes at graduated rates. Instead, they are taxed on their income at the highest marginal tax rate, even if they have very little income to prevent the use of trusts as income splitting tools. Testamentary trusts, however, continue to enjoy graduated tax rates. This basis of taxation permits income splitting, as income payable to the beneficiaries can be retained and taxed within the trust at the same graduated rate structure as is available for a living individual.So, a testamentary trust needs to file a federal tax return, Form 1041, aslong as it has any taxable income, I mean if it has a gross income exceeding a certain amount . I guess if its gross income is $600 or more. The IRS taxes a testamentary trust in a manner similar to how it taxes individuals. In addition to the credits and deductions available to individual taxpayers, the IRS permits a testamentary trust to deduct any amounts paid to a trust’s beneficiaries from its federal taxes, however. As a result, a beneficiary is responsible for paying federal income taxes on the funds he receives from a testamentary trust.
Sorry my bad not T3 but 1041



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Old 10-30-2014, 10:35 PM
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A testamentary trust is irrevocable and may be either simple or complex in its design and practice after the granto’s death;purpose is to control who receives what assets and when the beneficiaries receive the assets; even if, in general, a trust is not considered a separate legal entity, with respect to the income tax act it is. This means that a trust can earn and be taxed on its income like any individual taxpayer. The trust would file its own return,which is a 1041, and receive its own tax bill. A testamentary trust’s fiduciary retains responsibility for filing the trust’s federal taxes and for issuing the relevant paperwork, including Sch K-1, to the trust’s beneficiaries. Only the trust’s trustee may sign tax returns filed on behalf of a testamentary trust. Most trusts are different than other taxpayers in that they do not pay taxes at graduated rates. Instead, they are taxed on their income at the highest marginal tax rate, even if they have very little income to prevent the use of trusts as income splitting tools. Testamentary trusts, however, continue to enjoy graduated tax rates. This basis of taxation permits income splitting, as income payable to the beneficiaries can be retained and taxed within the trust at the same graduated rate structure as is available for a living individual.So, a testamentary trust needs to file a federal tax return, Form 1041, aslong as it has any taxable income, I mean if it has a gross income exceeding a certain amount . I guess if its gross income is $600 or more. The IRS taxes a testamentary trust in a manner similar to how it taxes individuals. In addition to the credits and deductions available to individual taxpayers, the IRS permits a testamentary trust to deduct any amounts paid to a trust’s beneficiaries from its federal taxes, however. As a result, a beneficiary is responsible for paying federal income taxes on the funds he receives from a testamentary trust.



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Old 10-30-2014, 10:47 PM
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Someone establishing a trust can list it under his own SSN#or create the trust as a separate tax entity with its own tax ID#. If the decedent created a living trust under his own SSN# died, trustee has to get a TID# for the trust because trustee cannot use his SSN# on the trust after his death. Irrevocable testamentary trusts, which are trusts created to disburse assets after his dies, also require TIN.



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