TurboTax Business - Rental Property Income reporting

[daileyk3]

Need some guidance - First time TurboTax Business user.  Working with trusts.

My wife is now trustee for a few trusts remaining after her father passed away in 2022.  One trust has bank and investment accounts and a vacation rental property OUT OF STATE.  Previously, all income from that trust flowed into her father's personal tax return, and he filed a Non Resident state tax return for that out of state Schedule E net income.  Similarly, I "presume" the various net incomes for 2023 will be reported to the four equal beneficiaries (his children) on Schedule K-1s for them to report on their returns. 

Two (related) questions/issues:

1) All four beneficiaries live in the same state but NOT the state of the rental property.  The K-1s generated by TTBusiness seem to include the Schedule E amounts correctly but don't seem to indicate anywhere that this is OUT OF STATE income.  In fact it doesn't even show the address/location of that property.  How are the K-1 recipients to know that they probably need to file a Non-Resident state return for this portion of trust income?

2) The vacation property has a local mgmt company handling rentals, income, most expenses, etc., and reports that detail to us each month and at year-end in a 1099 and report, which also includes any personal/family use for the year which % use varies year-to-year.  Her father's previous year 1040s included a "Statement of Rental and Royalty Income" page which provided all gross line item expenses for the year in a column with an adjacent column in which the personal use % of that expense could be excluded, with the net number going to the actual Schedule E.  His "Depreciation and Amortization Report" page included with his return also included lines allowing for "Less Exclusion" amounts which accounted for the personal use % to be excluded.  In TTBusiness is there a "Statement" page/form I can complete to adjust the line item expenses for personal use %, even if I have to do my own math?  Is there any way to do the same on the Depreciation Report or some other form where I can exclude any amounts for the personal % use for any given year?

Hope I've provided the info any experts need to help.  Thanks!

[tagteam]

Re the out of state issue, you will most likely have to file a (non-resident) state return for the trust as well as the federal return as the trust has income sourced to that state. 

In which state is the property located? You might want to check the state taxing authority's web site in that state for the filing requirements. If you need to file a return, you can purchase that state from within TurboTax Business.

[tagteam]

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@daileyk3 wrote:

In TTBusiness is there a "Statement" page/form I can complete to adjust the line item expenses for personal use %, even if I have to do my own math?

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I understand what you are referring to, but there is no such statement in TurboTax Business that emulates that in the individual income tax preparation products.

You will have to make any adjustments manually in Forms Mode since the program will automatically adjust the deductions based upon rental and personal use days (which may not be correct in some instances).

[daileyk3]

Thanks for your help.  I'll keep looking into things.

Wondering (if you know) that if I file a trust state return (for SC, by the way,) will that TTBusiness state return also create a "state K-1" (if there is such a thing) for each beneficiary?  If yes, that should address the issue.

[daileyk3]

You've got me thinking...

I use TTHome&Business for our personal returns each year but have never had rental property income to report.  Is it possible that the Home&Bus has forms (for Statement of Rental Income and for Depreciation) that I could create on my own separately to include with the trust 1041?  I'll try to look, but, if you know...

[tagteam]

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@daileyk3 wrote:

Wondering (if you know) that if I file a trust state return (for SC, by the way,)...

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Well, I have some bad news which makes this moot. TurboTax Business does not support SC fiduciary.

See https://care-cdn.prodsupportsite.a.intuit.com/forms-availability/turbotaxbusiness_states_windows_sel...

Otherwise, yes, it would have generated K-1s.

[tagteam]

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@daileyk3 wrote:
.....Is it possible that the Home&Bus has forms (for Statement of Rental Income and for Depreciation) that I could create on my own separately to include with the trust 1041?

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Yes, that would be a distinct possibility but you do not need to file it; just create it and retain it for your records.

[daileyk3]

Ugh...  But THANKS anyway, especially for helping and educating me.   I really appreciate your time.

I'll look into it, but I presume I'll have to go straight to SC online and download forms and instructions to create and file with them directly.  (You know, kind of like the old days, when one would pickup forms and instructions from the local library!)  I'll keep searching...

[daileyk3]

Thanks for this, too.  I'll see what I can find in Home&Business.

[daileyk3]

Still at it, with much new stuff learned and even more headaches re: SC filings.  Assessing some options and wondering:

Am I "allowed" to file a federal 1041 for the trust, passing all income to beneficiaries on K-1s, BUT file a non-resident SC1041 which claims all SC income at the trust level only, NOT passing to SC K-1s - that is,  have the TN trust pay the SC tax on the out-of-state rental property income and NOT pass that SC income on to the beneficiaries at the state level.  Trying to keep the TN benefs from worrying about SC tax returns, especially if I make any mistakes.  That is, keep the problems at the trust level.

[tagteam]

@daileyk3 

You're going to have to check the SC law and procedure yourself because, although I am aware that doing this is possible in at least a couple of other states, I am not certain about SC (but I can't believe that would not be possible).

[daileyk3]

Thank again, I'll see what I can find out.

Also, as another alternative, maybe I'll file both federal and SC state with all its income taxed to the trust (Yeah, I figure the total tax due is likely to be a bit higher than if I pass it through, but then no add'l tax filing burden to benefs.)

But when I try to do this in TTBus, it won't let me count the corpus amounts distributed during the year.  When I include it as Tier 2 or on the form directly, it immediately re-computes (which is kind of cool!) and pushes the NDI amounts out to the K-1s, etc.  Even though we distributed some corpus, should I just leave it out of TT (and therefore 1041 Sched B line 10, etc) since it's not taxable?  Can't figure another way to make the trust have complete responsibility for taxable income and still "admit" to making some discretionary distributions.

[tagteam]

Yes, you can omit that because it's not taxable.

As an aside, I cannot imagine why SC would care whether you passed the income through to the beneficiaries or had the trust pay any SC tax due. I'm also not certain why how you handled the income on your federal 1041 would matter to SC. FWIW......

[daileyk3]

Yeah, seems logical to me, too... but, logic and tax codes go together like... NOT!