we can't see the trust agreement. however, under the tax laws if you are both the grantor and beneficiary the trust is treated as a grantor trust which means all income and expenses pass through to the grantor. whether a grantor trust return needs to be filed depends on what Identification number was used to report the capital gain. if it was the trust a grantor trust needs to be filed. if not, then the transaction is reported on your 1040. even if not a grantor trust, the trust may allow the trustee to pass the capital gain through to the beneficary.
the tax rules for what is a grantor trust are spelled out in code sections 671-678
Under those rules, a grantor trust is any trust in which the grantor retains one or more of the following powers:
- A reversionary interest of more than 5% of the trust property or income;
- The power to revoke the trust and/or to return the trust’s corpus/principle to the grantor;
- The power to distribute income to the grantor or grantor’s spouse;
- Power over the beneficial interests in the trust;
- Administrative powers over the trust allowing the grantor to benefit.
A trust will also be deemed to be a grantor trust under either of the following circumstances:
- A trustee, beneficiary, or other person a power exercisable solely by himself to vest the corpus or the income therefrom in himself;
- A United States person who directly or indirectly transfers property to a foreign trust.
