Rick: thank you for your reply. I have reviewed the trust document and it appears that during his lifetime, my father had broad powers over the assets in the credit shelter trust. For that reason, I think this is a grantor trust.
The interest in the LLC was a community property interest. When you said in your reply "if your dad owned the LLC interest, then at this point in time, that interest would be stepped up." Not sure what you mean by "at this point in time". Am I correct in thinking that your answer means that the adjustments I need to make on a annual basis to my outside basis in the LLC for purposes of determining how much I can deduct of ordinary business losses from the LLC would not be the FMV of my father's LLC interest when he died, but rather the amount of that interest reduced by income distributions to my mother until her death?
