I’m working on a trust return in which the trust received $300,000 form IRAs/Annuities. There are 3 beneficiaries (all adult children of the deceased). The only distributions from the trust in 2020 were for the deceased’s funeral expenses. I know the funeral expenses are not deductible by the trust.
Would that scenario require the trust to pay tax in full on the IRAs/Annuities?
Can the IRA be "deemed to have been distributed" to the beneficiaries so that I can push the income down to the beneficiaries (on their K-1) and have them pay a lower overall tax?
Can capital gains be considered part of DNI if they have always been distributed to the beneficiaries from the inception of the trust? So, then they could also be passed along to the beneficiaries?
Separate question...the trust was created in December 2011. The grantor died on July 17, 2020. What date do I put on page of the first trust return (2020) as the date the trust was created?
I'm working on a similar case and researching whether a Section 645 election can be made. If you can file with a fiscal year, distribute the money now and let the beneficiaries pay tax on what is reported on their 2021 Schedules K-1.
Is that a possibility for my situation? This is the first year of the trust for my client (decedent passed away in July 2020). Am wondering if I make a fiscal year election (with a June 30, 2021 year end) and since we're still within the fiscal year, a distribution could be made to the beneficiaries, thereby pushing the IRA income to their personal tax returns and avoiding a huge trust tax liability.
Anyone have any thoughts about this as a possibility?
The link to the article attached in the other responce is directly on point. I am aware of cases which are similar where the Section 645 election was made partially for these same purposes. The entire estate has to be thought of, not just this trust.
If it were me I would probably contact the trustee(s) &/or the attorney who prepared the trust.as well as other trusted advisors for their input and guidance.