Irrevocable Trust Tax return

Forum|Forum|4 years ago
May 7, 2022
1 reply
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My dad passed away and I am the Trustee. After getting an EIN, the revocable living trust was converted to an irrevocable trust and per his Will, the assets (all equities) were sold and distributed to his beneficiaries. There are significant long term capital gains in the Trust from the date he died (step-up) until I sold the assets (all equities).

My dad wanted the Trust to pay any and all capital gains taxes so his beneficiaries wouldn't have any tax liability. Will the Trust capital gains be provided on a 1099? All the Trust assets were in 1 brokerage account so I expect only one 1099. Is it simple to prepare the Trust Tax Return? Also, I plan to pay the entire tax liability with my personal check. Is that allowed? I will close the Trust Account before the end of the year.

Not A Product Question

Critter-3

Talk to the broker ... the account should have been closed as of the date of death and the estate account opened using the DOD values so that 2 separate tax forms should be issued next Jan.

Also paying taxes at the estate rate may not be the best option ... please talk to a local tax pro to discuss the options allowed.

https://www.irs.gov/publications/p559

M

mitchden1Author

Employee

The revocable living trust account was closed on the date of his death. The irrevocable trust account was opened as soon as I provided the irrevocable Trust EIN. The equities were stepped up and there was a long term capital gain when I sold all the equities in the Trust. Since my dad didn't want the beneficiaries to have any tax liability, can I pay the IrrevicableTrust tax liability with my personal check? Will I get a 1099 for the Irrevocable Trust? I know I will get one for the revocable living tryst.

fanfare

Employee

The problem with your Dad's will is that if the Estate pays the tax it is at a much higher tax rate than if the Estate passes the gains to the beneficiaries via K-1 and they pay at individual rates .

As a fiduciary you should pass the gains to the beneficiaries.