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Posted by Stuart A. Bronstein on March 4, 2007, 8:50 pm
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> My minor son's grandmother died and she designated her son
> (my son's uncle) as Executor. A Trust was set up in my
> son's name by the uncle with no funds to be distributed
> until my son was an adult. This Trust has its own
> "Beneficiary's identifying number" (not my son's social
> security number). Today we received a Schedule K-1 (Form
> 1041) from the uncle (again with the "Beneficiary" listed as
> the Trust with its own ID -- a 20-xxxxxxx number) with
> instructions that we had to file my son's share of income,
> etc on our 1040 form, and were responsible for paying any
> taxes. Is this correct? I checked with the IRS and the
> person I spoke with said whoever was listed as Beneficiary
> was required to submit the form. This is the trust--NOT my
> son who has received no funds whatsoever. I'm very
> confused.
It depends on the precise terms of the trust. But in
general trusts of this type are irrevocable and are required
to pay their own income tax. They get a deduction for any
income distributed to the beneficiary, who pays tax on it.
But that's the only tax a beneficiary should pay tax on.
If you're legitimately getting a K-1 it would be because
your son or his parents would have some rights in the trust
that would cause it to be a "grantor trust" under internal
revenue code §671 etc.
Stu
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