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Posted by ChrisZ on January 26, 2008, 12:23 pm
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> > I live in california, I am the successor trustee of my fathers trust.
> > he died in 2006. The only income the trust receives is monthly rental
> > income from a gas station. I distribute $2,000 to my sister and I
keep
> > the rest of the monthly income. the first year I filed a k-1 for my
> > sister but did not file one for myself.
>
> If you got any of the income, you must get a K-1. If there was income
> that wasn't distributed it must be taxed to the Trust. If the trust
> instrument requires all income to be distributed, you must distribute
> it all on K--1s and it is then probably a Simple Trust, but that is
> immaterial to you if all the income is distributed on K-1's. Since
> you didn't distribute all the income it's a Complex trust, but you
> have filed a false return nd taken cash without reporting on a K-1 so
> probably you didn't pay tax on it either.
>
> >This year I will file a k-1
> > for both of us. This is the second year I will be doing the trust
tax
> > return. A few questions I have, the first year tax return I said it
> > was a complex trust because I did not distribute all the income. In
> > the years I do distribute all the income can I say that the trust is
a
> > simple trust?
>
> No Unless the trust instrument requires distributionof all ncome you
> can't call it a Simpl;e Trust. It doesn't make any difference to you
> because if all the income is distributed there is nothing to save with
> a higher Exemption.
>
> >Am I able to change from year to year saying its a
> > complex or simple trust?
>
> No, not unless it is actually a Simple Trust and you fail to follow
> the terms so that it becomes a complex Trust that year..
>
> >Also how can it be a simple trust if you need
> > to keep some money in the trust to pay lawyer fees and expenses?
thank
> > you
>
> A Simpole rust would pay the bills and deduct them from YOUR current
> income becaus your sister gets a fixed amount. Curent income to
> distribute is AFTER paying expenses. Spend some of that income on a
> competent tax preparer, or read the 1041 instructions.
I think what is confusing in a trust tax return is the terminology, e.g.
the term "distribution" means assigning income to a beneficiary on a K1
regardless of whether they received any actual cash or income or assets.
Lawyers can make trust terms vague and confusing so there are different
interpretations for an executor. The OP should seek competent advice but
it is not outside the realm of doing it yourself once you get good
advice.
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