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I have a client who has multiple residential rental

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I have a client...

I have a client who has multiple residential rental properties that were put into a Trust. I am doing the schedule E's for the 1041 filing. Is there a limit for the amount of losses that can be recognized on the 1041 return?

Accountant's Assistant: The Accountant will know how to help. Is there anything else important you think the Accountant should know?

3 of the properties were sold for a gain of about $70,000

Submitted: 2 months ago.Category: Tax
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Answered in 6 days by:
3/20/2018
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 months ago
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 14,215
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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Customer reply replied 2 months ago
I still need some help. Thanks!
Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 months ago

Yes, a Trust cannot use passive activity losses to offset income other than passive activity income. Also the Trust is not able to distribute the passive activity loss to the beneficiaries.

...

Trust taxation uses the principal of Distributable Net Income which acts as a conduit to avoid double taxation.

...

The income that is distributed from a Trust to the beneficiaries passes through this conduit and the beneficiaries become taxable on their share of the income distributed. But passive activity losses in excess of passive activity income aren't allowed to reduce other income sources that would be included within DNI and therefore will not get passed to the beneficiary.

...

So, just as with an individual (except that the special 25000 deduction in excess of passive income for landlords with lover income doesn't apply here), the passive activity losses get suspended and carried forward at the Trust level to be utilized against later passive activity income

...

THEN, Losses are not passed to the beneficiary until the final years of the Estate or Trust.

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Tax Professional: Lane, JD, CFP, MBA, CRPS replied 2 months ago

Please let me know if you have ANY questions at all, before rating me.

If this has helped, and you DON’T have other questions … I'd appreciate a positive rating (using the stars on your screen, and then clicking “submit")

That’s the only way JustAnswer.com will credit me for the work.

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I hope you’ll rate me based on accuracy and thoroughness, rather than any good news / bad news content

But again, let me know if you need more here,

Lane

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