Originally Posted by Reno98
#1;Instructions for IRS Form 1041 for Estate & Trust returns indicate Section 645 of the IRS Code provides that the tax return(s) for an estate that includes a revocable living trust (grantor trust) can be combined such that a single return (Form 1041) satisfies all reporting requirements. To elect to use that provision one must file a Form 8855 with the Form 1041.....and having done so, the election is irrevocable.
Such an election seems to make sense when all of the assets of the deceased are/were in a revocable living trust such that the estate and the assets of the trust are essentially the same.
#2;Question: Is there any reason (pitfall to avoid) why one should NOT elect to file a Form 8855?
#3; And if one does not do so by filing a Form 8855, are two returns required (one for the estate, one for the trust)? Presuming that applicable taxes are only owed once, if two forms were submitted covering the same assets/taxes, one would be redundant.
#1;correct;in general, once the taxpayer ‘s revocable trust contains most of the estate assets, the estate and the revocable trust each had to file separate returns; the trust could not use the income tax advantages available to the estate. The new tax law added Sec. 645. Under sec 645, if both the estate executor and the trustee of a QRT so elect, the trust will be treated and taxed as part of the estate..
#2; You only need to file the Form 8855 aslongas you want to file only one 1041. Otherwise, you file a 1041 for the estate and a separate 1041 for the trust.once you choose not to file 8855, once you choose not to file 8855, any income / expenses of an estate will be reported on the estates 1041, while any income/ expenses of the grantor trust for the period beginning on the decedent's date of death and ending on Dec 31st of that year will be reported on the trust's 1041.
#3;no only one return as mentioned above