I am working on a Decedent's Estate. I selected the Simple Trust option but the trust is a Complex Trust. TurboTax Business will not let me change the option. Help?

[clussier]

I initially selected Simple Trust in response to questions in the Step By Step mode. I later discovered that the Decedent's Estate is actually a Complex Trust. TurboTax Business will not let me change the option check mark on Form 1041 or the Step By Step page from Simple Trust to Complex trust. As a result, the distributions page will not let me enter the actual distribution to beneficiaries because the amounts are more than the trust income. The distribution amount included part of the principal of the trust and not just income. 

How do I force the program to accept the change from Simple Trust to Complex Trust? Note: I also have Decedent Estate option checked.

[ScruffyCurmudgeon]

Please clarify - you mention both "Simple Trust" and "Estate" - please confirm that you are not working the the State 1041 ut ii nstead attempting to work with what is probably a resulting Irrevocable Trust (Complex) that is the result of the decedent's death and the assets previously in a  Revocalbe Trust

[Anonymous_ · Accepted solution]

" Note: I also have Decedent Estate option checked."

You cannot have both checked in the program. 

You need to uncheck the Decedent's estate box and then you will be able to check the Complex trust box.

[HydroSci]

I have this same problem.  Irrevocable trust (living trust).  I made a 645 election.  TT does not have a "step by step" way of addressing the 645.  So I checked the 645 box in G and entered the EIN of the trust beneath that.   However, when I checked the Decedent's Estate  - Date of Death (DE) box in A , as required by the IRS, it gives an error because the Complex Trust (CT) box is also checked.  I cannot uncheck the CT box, even if I first uncheck the DE box.  Suggestions? 

[Anonymous_]

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@HydroSci wrote:

I have this same problem.  Irrevocable trust (living trust).  I made a 645 election.  TT does not have a "step by step" way of addressing the 645.  So I checked the 645 box in G and entered the EIN of the trust beneath that.   However, when I checked the Decedent's Estate  - Date of Death (DE) box in A , as required by the IRS, it gives an error because the Complex Trust (CT) box is also checked.  I cannot uncheck the CT box, even if I first uncheck the DE box.  Suggestions? 

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Have a tax professional prepare the return. Preparing a return with Section 645 election is not a DIY proposition; you need professional assistance. TurboTax Business is programmed to prepare relatively simple and straightforward income tax returns for entities, in Step-by-Step Mode, and a 1041 with a Section 645 election is definitely not within that realm.

As an aside, a 645 election is made by the trustee of a qualified revocable trust and the executor of the related estate; irrevocable trusts are typically not considered "owned by the decedent" on the decedent's date of death and, hence, are generally not qualified.

Further, you cannot have both both boxes checked on your 1041. Since the trust is treated as part of the estate, only the estate box would be checked.

Please, at least consult with a qualified tax professional with respect to this tax scenario.

[HydroSci]

To clarify: The living trust was revocable, until the passing, in which case it became irrevocable. With regards to the 645 election: I believe that the way around that in TT is to file as a decedents estate and edit the forms to select the 645 election,  and to change the title of Executor to Trustee.  I believe that I am correct when I say that in our case there are no estate assets (they passed to the Trust via poor-over will).  So the FMV of the estate is zero, and any income from those assets that passed to the trust was issued under the SSN of the decedent in the year that he passed - so I assume that it can be included in the final return for the decedent.   The income to the trust is only from a few stock sales and interest on savings.  The only expenses come from a brief conversation with attorneys.  The resulting 1041 and 541 appear very simple.       

[HydroSci]

FYI: I did not mean to sound like I am sure about what I am doing.  Put a question mark after assumption stated.

[Anonymous_]

With the realization that I do not know all of the specific facts, it does not appear as if you need to make a 645 election in the first place; all of the assets were held by the trust (which it is now apparent was a RLT and, hence qualified).

If there is no other reason to file a return for the estate, then you most likely only need to file a 1041 for the trust to include the income from the stock sales, interest, and legal expenses.

[HydroSci]

I agree and I regret the 645.  But it is my understanding that once elected it cannot be undone,no? 

[Anonymous_]

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@HydroSci wrote:

I agree and I regret the 645.  But it is my understanding that once elected it cannot be undone,no? 

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It is irrevocable; the election has to be terminated.

See https://www.law.cornell.edu/cfr/text/26/1.645-1#f