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when you said that the estate was closed - that means the farmland title was transferred out of the estate - so we need to know HOW the farmland is now titled?Who is (or are) legal owners of the farmland?When you mentioned a new EIN - it is not clear to WHOM that EIN is assigned?
Do you form another legal entity to hold the title? If yes - what is that entity?
Please review and reply to clarification questions.They are needed to provide the full and comprehensive answer.
So far - my understanding that the farmland is titled to you and your siblings - so if you run farming activity - that is a partnership - which is a separate entity.
A partnership is the relationship existing between two or more persons who join to carry on a trade or business. Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business.Partnership should issue schedules K-1 to each partner reporting pro-rata share of net taxable income (or loss) -http://www.irs.gov/pub/irs-pdf/f1065sk1.pdfSome additional information about partnerships may be found in IRS Publication 541 -http://www.irs.gov/publications/p541/index.html.
- you do need to get EIN for the partnership
- you will file the income tax return for the partnership - form 1065 - and will report all farming income and deductible expenses;
- you will determine net farming income (or loss) - and pro-rated share will be passed to each partner - on form K1
- then - each partner will use that information when individual tax returns are prepared.
Regarding the trust - that is a SEPARATE entity - and whatever you paid for that trust - if your loan to the trust. you may not deduct that amount.
However - the trust files its own tax return - and may deduct some expenses - including taxes. That amount is reported on form 1041.
the income from the farm is constructively received farm owners.
If there is taxable income - it is taxed for co-owners REGARDLESS how the money are used.
If all co-owners choose proceeds to go to your aunt - that is your choice - but that would not affect the tax liability.
You may NOT re-assign income to another person for income tax purposes.
Similarly for the trust - any income and expenses actually or constructively received or paid by the trust are reported on the income tax return of the trust (form 1041) and may not be re-assigned to another entity or another person.
It is possible that the trust is not required to file - that is a different issue.
There is no "better" - it might be simpler to have one entity instead of two that you have now - but there is no clear determination what is better.