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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29571
Experience:  Taxes, Immigration, Labor Relations
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I have a tax question and I 't think the IRS is correct,

Customer Question

I have a tax question and I don't think the IRS is correct, would like a second opinion.
Submitted: 1 year ago.
Category: Tax
Expert:  Robin D. replied 1 year ago.


If you can post your question I will be happy to address it.

Customer: replied 1 year ago.

We established a testamentary beneficiary trust on July 8, 2014. We filed the first tax return for the trust on a fiscal year basis, year beginning July 8, 2014, ending June 30, 2015. The IRS has notified us that they rejected our return and will not accept it. The reason they said is because the trust cannot have a fiscal year for its first tax year. The form is 1041. They said if they don’t hear within 30 days, they will withdraw. IRS indicated we should amend that return they rejected and we should file a return for the period July 8, 2014 through December 31, 2015. If they’re correct, then would it be a 2014 return or a 2015 return? Or would it be an 18 month return?

Expert:  Robin D. replied 1 year ago.

I rarely withdraw but I am going to opt out as your tax question deals with trusts.

Your question will be available to others and will be addressed by an expert that deals with trust reporting.

Do not respond to me.

Expert:  Lev replied 1 year ago.

Here is the statute

(a) In general

For purposes of this subtitle, the taxable year of any trust shall be the calendar year.

(b) Exception for trusts exempt from tax and charitable trusts

Subsection (a) shall not apply to a trust exempt from taxation under section 501 (a) or to a trust described in section 4947 (a)(1).

Expert:  Lev replied 1 year ago.

Different tax year is allowed for the estate.

Thus - if the trust makes so-called "the 645 election," that woudl allow to treat the trust income tax return as a combined estate and trust tax return.
In this case a fiscal year woudl be allowed.

Expert:  Lev replied 1 year ago.

So far - the IRS seems as correct and your filing must be corrected.
You will have first short tax year for the period July 8, 2014 through December 31, 2014 - and you will use 2014 tax forms.
then - you will file 2015 tax return for the full year.

Any questions?

Expert:  Lev replied 1 year ago.

I appreciate if take a moment to rate the answer.

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If you still have any doubts, need clarification - please be sure to ask.
I am here to help you will all tax related issues.