Trust making section 645 election, inability to tick both decedent's estate and trust type on 1041

[stwpcw60]

We are filing form 1041 for a complex trust and making the section 645 election.

IRS Form 1041 instructions for Item A state to tick the decedent's estate check box. Prior year 1041 instructions also stated to tick as many Item A boxes as required. In our case, as a complex trust, it appears both "complex trust" and "decedent's estate" check boxes should be ticked.

TT for Business does tick the Item G 645 election check box and allows entry of the trust's TIN.

2020 1041 Instructions state "Be sure to check the Decedent's estate box at the top of Form 1041 and Item G if the filing trust has made a section 645 election."

This is a complex electing trust. How do we tick both the "decedent's estate" box and "complex trust" box?

[tagteam]

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@stwpcw60 wrote:

This is a complex electing trust. How do we tick both the "decedent's estate" box and "complex trust" box?

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You do not and what you are describing is not the proper procedure for a Section 645 election.

You need to check Box G in Forms Mode and provide the TIN for the trust. You also need to file Form 8855.

Frankly, and to be quite blunt, you are way out DIY territory and absolutely need to consult with an experienced local tax professional and legal counsel.

See also https://www.irs.gov/instructions/i1041#idm140229121819120

[stwpcw60]

Thanks for the reply and sending 1041 instructions.

If not the proper procedure, please enlighten me.

For context: there is no executor, a trustee is filing. Form 8855, 1041, and appropriate K-1's filed. TIN for trust obtained, 1041 filed using trust TIN,

IRS 1041 instructions state:

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Item A. Type of Entity. On page 1 of Form 1041, Item A, taxpayers should select more than one box, when appropriate, to reflect the type of entity.

G. Section 645 Election
If a section 645 election was made by filing Form 8855, check the box in item G.See Special Rule for Certain Revocable Trusts under Who Must File and Form 8855 for more information about this election.

Who Must File -> Trust -> Special Rule for Certain Revocable Trusts ->

General procedures for completing Form 1041 during the election period.

If there isn't an executor. If no executor has been appointed for the related estate, the trustee of the electing trust files Form 1041 as if it was an estate. File using the TIN that the QRT obtained after the death of the decedent. The trustee can choose a fiscal year as the trust's tax year during the election period. Be sure to check the Decedent's estate box at the top of Form 1041 and Item G if the filing trust has made a section 645 election. For Item G, the filing trustee must provide the TIN of the electing trust with the highest total asset value. The electing trust is entitled to a single $600 personal exemption on returns filed for the election period.

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So based on the instructions it appears it is ok, if not expected, for an electing trust to tick Item A "decedent's estate" and "complex trust". Or, does the electing trust simply tick the "decedent's estate" box and not the "complex trust" box?

And perhaps more importantly, when someone uses TT Business to complete a 1041 for a trust and they tick Item G box, then it would appear Item A "decedent's estate" check box must be ticked. I then wonder if TT misses an important error check:

If 8855 filed then tick item G and item A decedent's estate (and item A complex or simple trust?).

And then there is the whole $600 vs $100 personal exemption bit.

Appreciate any guidance/help on this.

[tagteam]

Again, this is even more complex than you are aware, particularly down the line.

However, generally, one 1041 is filed and it combines the trust with the estate; the estate box is checked and the trust is treated as part of the estate in most cases. There are some distinct advantages to doing so.

See (for example)  https://www.thetaxadviser.com/issues/2013/dec/clinic-story-02.html

(note that separate accounting needs to be maintained)

Regardless, the estate receives the $600 exemption.

[stwpcw60]

Thanks for the reply.

Understand there are additional complexities, like:

• Separate accounting
• The election is for two years
• If estate chose fiscal year, then at the end of the election period the electing trust will file a final partial year return
• If the trust continues past the electing period, the filing trustee will need to obtain a new TIN for the trust
• At the end of the election period the trust will need to switch to filing on calendar year vs fiscal year
• New TIN must be applied to all remaining trust accounts and transfer of assets performed

And the question remains: during the election period are both the decedent's estate and complex trust check boxes ticked?

Appreciate the help.

[tagteam]

If you are filing a return with TurboTax Business for an estate that made a 645 election, check the Decedent's estate box (also include the trust's TIN on Item G).

[stwpcw60]

Thanks.

And though I understand this could open a whole other can of worms for TT, it appears with the whole 645 election bit there is an opportunity for error checking/guidance improvement. Basically, IF someone makes a 645 election, THEN the Item A decedent's estate check box should be ticked.

Again, thanks for your time.