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Stephen G.
Stephen G., Sr Income Tax Expert
Category: Tax
Satisfied Customers: 7119
Experience:  Extensive Experience with Tax, Financial & Estate Issues
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My mother died in July of last year. She had a living trust

Customer Question

My mother died in July of last year. She had a living trust that became an Irrevocable trust at her death. My mother had a checking account and her house in the trust at the time of her death. Her IRA was disbursed to her Trust because it was the beneficiary upon her death. I have given each of my siblings 25,000 each from the Trust and I am holding approximately 45% for any taxes the Trust will have to pay for taxes.
My question is does the TRUST file taxes on the IRA amount received and if so, what form do I use? Also, my siblings and myself file form 8949 for the money received from the trust?
Submitted: 1 year ago.
Category: Tax
Expert:  Stephen G. replied 1 year ago.

OK, first of all, the Trust will need to file a tax return beginning when it became irrevocable as of your mother's date of death and ending at 12/31/2015. The next year beginning 1/1/2016.

In order to avoid paying tax at the Trust level on the IRA, the trust will be able to use the Distribution deduction using Schedule B on the 1041. That should reduce the income tax substantially as the Trust tax rates and brackets are much higher than the individual tax brackets.

Your mother's final personal return for 2015 should cover the period 1/1/2015 thru her date of death in July, only.

If the trust received 1099s that reported income for the entire year of 2015, that income will have to be split between before & after her date of death. Before being reported on her final personal return on Form 1040 and after on the first return for the trust on Form 1041.

The Trust needs to apply for an EIN if that hasn't been done already.

I'm sure you will have additional questions and I'll be happy to answer them or assist in any other way you wish.

The Trust, as part of the 1041 filing, will provide a Schedule K-1 for any income to be reported on the beneficiaries' individual income tax returns for year 2015.

Expert:  Stephen G. replied 1 year ago.

Just checking in...............

I see that you have been able to review my response; do you have any further follow-up questions?

If not, please remember to rate my response as that is the only way we receive credit for our work.

Thanks very much,

Steve G.