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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 28082
Experience:  Taxes, Immigration, Labor Relations
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Lev, I was the fiduacary aunts estate, She left my siblings

Customer Question

Hi Lev, I was the fiduacary for my aunts estate, She left my siblings and myself farmland that is adjoining to a land trust my mother had.(same heirs). I get about 8000 a year from farm rental but that money is used to pay the taxes on the farm land and trust home plus 1300 to com-ed for rent. My Aunts estate closed last year and the Irs sent me an ein #. Should I file the taxes under the farmland with that number. Or, should I have all the land put in the land trust and get a new EIN #.
Thanks,
Aileen
Submitted: 1 year ago.
Category: Tax
Customer: replied 1 year ago.
The taxes killed me last year because the farmer used my SS on the W9. With 3 kids in college I did not qualify for any benefits. I paid out my siblings 600 a peice so I didn't have to 1099 them. We want to sell all the land but are having no offers.
Expert:  Lev replied 1 year ago.

Hi Aileen,

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?

Expert:  Lev replied 1 year ago.

Please review and reply to clarification questions.
They are needed to provide the full and comprehensive answer.

Customer: replied 12 months ago.
Hi Lev, sorry so long to get back to you. The estate is closed it is in my siblings and myselfs name. We rent out he farm land and because it is over $8000 dollars I don't qualify for any credits on my taxes. We have to pay com-ed $1500 for rent and over a thousand for property taxes. My mom's land is in a land trust which is adjacent to my aunt's. I paid out each sibling $600 last year and paid the back taxes. I was hoping to combine the land into my mom's land trust and get an ein for taxes. Does that make the most sense? Thanks again for your help!
Expert:  Lev replied 12 months ago.

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.pdf
Some additional information about partnerships may be found in IRS Publication 541 -
http://www.irs.gov/publications/p541/index.html
.

So

- 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.

Customer: replied 12 months ago.
Lev there is no return filed on the trust, the income from the farm went to my aunt, she paid all the taxes on the farm although $600 a year went to the land trust. So the same people on the trust own the adjacent farm land that my aunt left. Would it be better to put all the land into the trust with an ein and pay taxes that way?
Expert:  Lev replied 12 months ago.

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.

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