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roaringbranch
Employee
March 17, 2023
Solved

I transferred a rental house I owned to a trust for the benefit of my disabled adult son. No money was exchanged. How do I report the disposal of this property?

  • March 17, 2023
  • 2 replies
  • 0 views
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Best answer by Anonymous_

Was this a qualified disability trust? 

 

See https://www.irs.gov/instructions/i1041#en_US_2022_publink1000286061

 

Did you get an EIN for the trust? Did you file a 709 for the gift?

 

You most likely need to file a 1041 for the trust. More details are needed and you should consult with a local tax professional and/or legal counsel.

 

2 replies

Carl11_2
Employee
March 17, 2023

I don't know much about trusts. But I do know it can matter what kind of trust and how you've set it up. Another big factor can be what state you are in, as laws on this can and do differ state to state. So if you can provide those details, hopefully someone can provide you some useful feedback.

 

The below is guidance on what part I know. But don't do this yet until you get a response from another more knowledgeable on trusts.

To show the removal from your personal tax return, you'll indicate it was converted to personal use at least one day before it was transferred to the trust. You must also work through each individual asset in the Assets/Depreication section to show your disposal of each individual asset. For each asset, you'll indicate "I stopped using this asset in 2023" and on the "Special Handling Required?" screen you'll click YES. If you click NO, then you will be "force" to enter sales information. There was no sale or any other type of tax reportable transaction here. So do NOT click the NO button.

If you claimed any vehicle use at in time while you were reporting this rental on  your personal tax return, you'll need to work through the vehicles expenses section to show the disposal of the vehicle to. (also, removed for personal use).

Once all this is done, this will be the last year you will report this property on SCH E as a part of your personal tax return. Instead, the trust will report all rental income, expenses, insurance payments, property taxes, mortgage interest, and anything else associated with the business property.

 

roaringbranch
Employee
March 18, 2023

Carl, thank you, this is very helpful information. Also see my reply to "tagteam" below.

Employee
March 17, 2023

Was this a qualified disability trust? 

 

See https://www.irs.gov/instructions/i1041#en_US_2022_publink1000286061

 

Did you get an EIN for the trust? Did you file a 709 for the gift?

 

You most likely need to file a 1041 for the trust. More details are needed and you should consult with a local tax professional and/or legal counsel.

 

roaringbranch
Employee
March 18, 2023

Tagteam -- thanks for your observations.

Yes, this is an irrevocable special needs trust. I am not the trustee; the independent trustee obtained an EIN and will file 1041 when appropriate. The property transfer was effective late December 2022, with no income or expenses in the trust for that calendar year.

I will file 709 to record the basis of the gift.

My question is really how to report the disposition of the property on my own 2022 tax return. Carl provided a good outline, and I have decided to work with TurboTax Live Help to make sure everything is in order.