We have been filing our two rental properties on our personal return. We have transferred our rentals to a grantor trust. Do we now have to “dispose” of each depreciable item and close out the schedule E? When I tried that I created a huge loss.
I know that I need a K1 for reporting income and expenses but how do I calculate depreciation for the K1?
Thank you
I would start with asking the attorney who created the trust's to find out if they are trusts which need to file their own return.
A lot of grantor trusts (think living trust) are in my experience transparent for income tax purposes.
Thank you, I have asked the attorney and he said a 1041 will not need to be filed as the reporting will go from a k1 to our personal return. Grantor trusts from what I have learned are reported this way.
If the trust will file a tax return, on the 1040 you stop depreciating them as of the date of transfer.
This is not a gain or loss situation.
If the trust is disregarded for income tax purposes you leave everything the way it is.
So you ignore the trust for income tax purposes and file the 1040 just like you have been doing.
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