Should the type of 1041 be Complex Trust when filing for a deceased's Revocable Living Trust?

[dlenardon]

Since the revocable trust's grantor has passed, the trust became irrevocable, so not a Grantor Trust type?  And type of Decedent's estate seems for when all assets not in Trust?  And is it correct that a separate 1041 for Deceased estate would not be needed with no income outside of trust?

[tagteam · Accepted solution]

"Should the type of 1041 be Complex Trust when filing for a deceased's Revocable Living Trust?"

Complex or Simple depending upon the trust instrument (refer to the information in the link below).

https://www.irs.gov/instructions/i1041#idm140630131644656

A separate 1041 for the estate does not need to be filed unless the estate has $600 or more in gross income, which would be virtually impossible if the estate has no income-producing assets.

[sallywing]

You can treat a qualified revocable Trust as part of an Estate using form 8855.  I'm trying to complete this 1041 and running into problems with the questions and not being able to get answers to the question:  How do I file this 1041 for BOTH the estate and the trust?

Can anyone point me in the right direction?

[tagteam]

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@sallywing wrote:

How do I file this 1041 for BOTH the estate and the trust?

Can anyone point me in the right direction?

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Yes, you need to consult with a legal/tax professional who has experience in estates/trusts income taxation, and this election in particular; a Section 645 election is not a do-it-yourself project.

Frankly, the fact that you are stuck at the very first step in the process indicates you should NOT proceed any further on your own; you will face even more confounding issues as you proceed so you need professional guidance without question.

Just for what it is worth, and in a nutshell, you are combining a trust with an estate - i.e., you are making an election to file one income tax return (Form 1041) for both the trust and the estate. That return is essentially filed as a return for the estate with the trust tacked on, with one of the primary advantages being it is not necessary to file one return for the estate and another return for the trust. 

Another rationale for consulting with a professional is, once made, this election is irrevocable.

[sallywing]

Thanks.  I do realize it's one return, and all my research says the 645 election is what I want to do.

I've done a lot of reading and studying since posing this question, and the fact that you gave me the answer I needed (and had found out in other places as well) makes me more certain about it.  You said I am to file the estate return with the trust tacked on.  That gives me the starting point that is NOT explained in the Turbo Tax return.  Start with the estate, or start with the trust?  Your answer and further reading answered that question.

So, again, thank you.  (I know some of this may seem simplistic to some of you, but sometimes all we need is the nudge in the right direction.)

[kmd]

I've seen a lot of discouragement from TurboTax reps in "DIY" opting for IRC Sec 645, via Form 8855, and I wonder if that's because TurboTax Business is riddled with errors and just a very poor tool for anything beyond bare bones 1041 filing?

[tagteam]

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@kmd wrote:

I've seen a lot of discouragement from TurboTax reps in "DIY" opting for IRC Sec 645, via Form 8855, and I wonder if that's because TurboTax Business is riddled with errors and just a very poor tool for anything beyond bare bones 1041 filing?

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I would not characterize TurboTax Business as being "riddled with errors", but I would characterize it as poor for anything beyond "bare bones 1041 filing" for those users who are not proficient in trust and estate income taxation and accounting. 

In other words, the program can be used for most complex scenarios and is useful for those with specific knowledge of the subject matter. For those who need guidance beyond "bare bones 1041 filings" I would recommend professional guidance.

[kmd]

I've found the 1041 software buggy, even for the very basic grantor's trust - from major function down to nits like spelling errors.

[kmd]

I'm working on my simple 1040 now, trying to import interest from Ally Bank, and TurboTax failed to import - it picked up one of my accounts but not the other two, causing my 1099-INT to be under-reported - just another example of why I chose "riddled with errors".....an egregious error and one that TurboTax management blatantly ignores, apparently.  I'm not the only one who has hit this problem - https://ttlc.intuit.com/community/taxes/discussion/turbotax-is-only-importing-half-of-my-ally-bank-1... I am losing faith in TurboTax after being a customer 10+ years.