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How do Ii report moving property (real estate) from a trust…

How do Ii report moving...
How do Ii report moving property (real estate) from a trust to my LLC. I am the sole surviving family member, trustee of the trust and have inherited all assists in and out of the trust. Is this a distribution? Do I report cost basis? Property was placed in Trust in 1995, does it have to be depreciated ( it was never depreciated by prior accountant doing the taxes on it.
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3/21/2018
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 32,719
Experience: Taxes, Immigration, Labor Relations
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"moving assets from a trust to the LLC" - actually involve two separate transactions

-- distribution of assets from the trust to beneficiaries, and

-- contribution to the LLC.

Both transaction are not taxable and do not affect the basis of the property - the basis remains the same.

.

Regarding depreciation...

Depreciation begins when a taxpayer places property in service for use in a trade or business or for the production of income.

So - if the property was used for the production of income it should be depreciated.

When distributing from the trust and transferring to the LLC - if the property - are still used for the production of income - we need to continue teh same depreciation schedule.

If the property was used for personal purposes - depreciation is not allowed.

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Customer reply replied 1 month ago
The property was originally purchased (placed in service) in 1985. It passed from their names into the name of my father's Revocable Trust in 1994.The property was to be used by my parents as a part time resident and perhaps a rental. Over the years they used the property less and less and by the 1990's it became mostly a rental, used very little by the family.My mother preceded (2008) my father in death and my father passed in 2015 at which time I became the sole surviving family member and sole beneficiary named in my parents wills. I had already become the trustee and fiduciary of the trusts before my father’s passing. I assume that the date that this property is placed in service will be the date that I transferred the property out of the trust and into my LLCI see on past returns no indiction that this property was ever depreciated.
Am I still required to enter depreciation on the tax form?If so am I correct to start with date of service as the the date it entered my father’s trust (1994) and not the date my parents first purchased it (1984)?My father purchased a property in 2010 and it was held in a partnership. That partnership dissolved in 2015 and the property was placed in my name. I am trying to see if it was depreciated in the five years it was in the partnership. I will assume that the information you can provide would apply to both of these properties.

The property was originally purchased (placed in service) in 1985. It passed from their names into the name of my father's Revocable Trust in 1994.

Because the property was in the father's Revocable Trust - it will be considered as inherited - and that property gets stepped up basis as its fair market value at the time your father passed away in 2015.

At the same time the trust .became irrevocable.

So it doesn't matter whether the property was or not depreciated before.

For the trust - it will be considered as placed in service in 2015.

So - you might want to amend tax returns for the trust for 2015 and 2016 to add depreciation deduction.

You are not required to do so - but that might benefit you.

Lev
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Customer reply replied 1 month ago
8220;moving assets from a trust to the LLC" - actually involve two separate transactions
-- distribution of assets from the trust to beneficiaries, and
-- contribution to the LLC.”I still some need guidance as to how to report the change of ownership on the trust tax report for 2017. If I list the transfer as a distribution how do I remove inherited property? I do not see any provision on the tax forms for that type of distribution. It only provides for selling or "Other" and the form is the same. It always asks for depreciation and warns me if I do not list it. You had stated that as this is inherited property there is no depreciation due to my new stepped-up cost basis. I am at a lost as how to transfer property out of trust and what IRS form to use.Do I “remove” the property from the trust in the form of a “distribution” to me via a K1 form. In other words, if I must remove the property from the trust on the tax report
Do I list the rental proceeds for 2017 as a distribution out of the trust via K1 or because the property was transferred into my LLC in 2017 do they get listed as 2017 income for the LLC?

how to report the change of ownership on the trust tax report for 2017.

distribution of the asset in-kind is not taxable transaction and is NOT reported on trusts's income tax return.

Only taxable income is reported on form 1041.

You had stated that as this is inherited property there is no depreciation due to my new stepped-up cost basis.

The depreciation should start from the date of death.

Do I “remove” the property from the trust in the form of a “distribution” to me via a K1 form.

On K1 we report ONLY taxable income.

That distribution in-kind is NOT taxable and is not reported on K1.

Do I list the rental proceeds for 2017 as a distribution out of the trust via K1 or because the property was transferred into my LLC in 2017 do they get listed as 2017 income for the LLC?

Report rental income and rental deductions on trust's tax return - up till the date the property transferred out.

Distribution of the property from the trust is not reported on K1.

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