So, my parents passed away last year and had twin (revocable) trusts, each with only half their home in it (and nothing else). The home was valued upon death by a broker at a value that was substantially more than it sold for about 3 months after their deaths. After realtor commissions, the net sales price was a lot less, say 50k. There were also a lot of other expenses in liquidating the estate which, I was told, can be assigned to the trust if I want, but I digress. The cash from the sale was placed in a trust bank account that earned no interest before being paid out to 5 beneficiaries. One of the five beneficiaries told me their accountant was asking if the trust would be supplying a Schedule K-1 and it made me think - oops, I guess I was supposed to handle that! A NOLO press executor book says that all beneficiaries who get distributions should get a K-1. Elsewhere, I read that the schedule K-1 is only necessary if some of that distribution is income. Does anyone here know which is true?
Someone else suggested that, even if the answer above is that no K-1 is needed due to no income, if the trust had a loss, which it did, that we might still want the Schedule K-1s issued so that the tax loss could be shared by beneficiaries. I wonder how much sense that makes given that the home sold within three months of death, for a value that is probably a more reliable indicator of value at death than some pre-sales-commission estimate done by a broker. One of the beneficiaries cannot use a tax loss and does not want any trouble with the IRS! Thanks so much for any help.
