Grantor trust reporting and allocation of income property expenses

Forum|Forum|4 years ago
April 15, 2022
1 reply
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I have seen online and been told by both a CPA and our trust attorney that certain expenses for our rental properties can be paid by our irrevocable grantor trust (property taxes, insurance, improvements expenses). However, we have other expenses (mortgage taken out in our names, utilities, misc. services, etc.) that are not on that list.

This has not been an issue in the past, as the trust had no liquid assets, so we personally incurred all of the expenses. However, we are selling one of our two rental properties this year, so the trust would then have funds to pay for allowable expenses. That obviously would be a benefit to us as we would not be paying those from our own funds. But I do not understand how we would document/report expenses paid by the trust vs. those we pay. It would seem that we would have to port some info from the trust's Schedule E to ours, but I don't know if that's correct or possible, as I don't have the TT Business Edition.

Not A Product Question

Anonymous_

Employee

Is this actually a grantor trust?

A grantor trust is disregarded for federal income tax purposes.

Don-CNYAuthor

Employee

Yes, it is a grantor trust. As such I have been submitting a schedule E for the rental properties as part of our personal return. But we have previously been paying for improvements, maintenance, property tax and insurance from our own funds. When we sell the one property the trust will have funds in it, not just property. I have been advised by both our trust attorney and a CPA that the trust can pay rental expenses, but I do not understand how that is properly reported, especially as nobody has indicated that our personal mortgage can be deducted. That means expenses would be partially paid by us and partially by the trust.

I have always done our taxes, and I worked in the past for both Turbotax online support and Jackson-Hewitt, but this is an entirely new area for me. I keep getting bounced between my attorney and CPA, so I thought I'd try here before going back to them again.