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1041 Type

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Level 3

When would you check the box "Decedent's estate" under A on form 1041?

Taxpayer is trustee for a trust that was originally revocable but became irrevocable at death of mother. Prior CPA prepared 1041 with Decedent's estate checked at top of form.  I thought that once the grantor trust becomes irrevocable the trust would be Simple or Complex.  Thanks for any help on this matter.

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Level 11

Doesn't sound like an estate to me, just another example of a trust meant to simplify administration and still open three years later.  I don't know how IRS will react if you file as a trust.  The EIN might be in a series reserved for estates (did they keep a copy of the application?).  I can't think of much difference it makes, except in the amount of the exemption if all the income has not been currently distributed.  The advantage to calling it an estate would have been choice of fiscal year, but you are long past that.  

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Level 11

Was a Form 8855 filed with that first Form 1041?  Are there assets or income not in the trust?  Probably just another case of someone who didn't need a living trust, whose beneficiaries didn't know what to do with it when they died.  

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Level 3

I don't think the election was made.  The living trust document states that unless terminated earlier, the trust terminates 21 years after the death of the last survivor.  Should the CPA have filed the 1041 as a Decedent's Estate type or rather as type Simple or Complex depending on distribution requirements?

Just as a simple example, what should happen here:

Taxpayer is alive and has a grantor/living revocable trust.  All income is reported on her 1040.  She dies, trustee obtains a tax id.  First year a 1041 tax return is filed after death, home is sold, there are income generating assets in accounts now titled to the trust with the trust id on forms 1099 and a 1099-S.  You go to fill out the first form 1041 for the trust.  The intention is to keep the trust open while assets are distributed to beneficiaries. What box should be checked for type?  

Thank you!

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Level 15

In whose name were the assets? I have seen numerous situations where a living trust was set up but not funded. Therefore, the assets belong to the estate and a 1041 for the estate is needed.


ex-AllStar
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Level 3

Hi srjcpa,

Actually there is a 1099-R for a life insurance annuity and a 1099-DIV.  Both are in the trust's tax id and the name of the account is XXX FAM TRUST, XXX Trustee, Dated xx/xx/xx 

Does Decedent's Estate sound correct?  Since the trust was founded in 2017 Lacerte gives a message that since the decedent's estate has been open for more than two years, attach an explanation for the delay in closing the estate corresponds to line 8 being checked.

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Level 11

Doesn't sound like an estate to me, just another example of a trust meant to simplify administration and still open three years later.  I don't know how IRS will react if you file as a trust.  The EIN might be in a series reserved for estates (did they keep a copy of the application?).  I can't think of much difference it makes, except in the amount of the exemption if all the income has not been currently distributed.  The advantage to calling it an estate would have been choice of fiscal year, but you are long past that.  

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Level 3

You are right, it would have been a lower exemption for a complex trust.

For my other example where I am working with the tax payer whose mother just died in 2019 - I know he got the tax id correctly and transferred assets to the trust id, the 1041 should be for a complex trust - would not be "Decedent's Estate" correct?

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Level 15

A trust is not an estate and vice versa. Only exception for tax purposes is when an election is made on Form 8855 to treat revocable trust as part of estate.


ex-AllStar
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Level 3

So it sounds like the prior CPA made a mistake in calling the return a Decedent's Estate.

My new 1041 is a trust  return as it was a revocable trust that is now irrevocable.  

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