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If a new client has had placed the entire home (including 50% of rental property) into a revocable trust back in 2011, and never reported it as such, we should amended the returns and file a trust return?


The BIDaWIZ Team's Answer:

No, they would not file a separate return Form 1041 as a living revocable trust is treated as a grantor trust (IRC Section 671). This type of trust is not a taxable entity when it is formed, it is a way of holding title to assets that will be subject to the control of the trust based on the terms that are in the trust. The trust is "disregarded" and all the items of income or expense are reported on line 17 of their Form 1040, as if the trust did not exist for tax purposes, at least for so long as the trust retains its "Grantor trust" status.

The BIDaWIZ Team



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