This is a return for a VA Irrevocable Trust with an EIN. I'm an only child, my mother is still living, but has been placed into an assisted living facility (which complicates matters further). All her property and investments were placed in this Trust in order to allow her to receive VA benefits (deceased father was military) and protect assists. There were 3 houses, 1 she lived in and 2 rentals. The complicated issue arises from placing her in assisted living. The Trust states that she can live in 1 home and that home realize rent income, nor can the home be sold. My daughter (her grand-daughter) was living in another house and paying fair market value rent. When my mother was no longer living in her home, my attorney said I could change the homesteaded home to my daughter's house which could no longer charge rent, and I could then rent out my mothers house, rather than it sitting empty until her death.
So for 2018 House A & B were rented and C had no rent and no expenses.
For 2019 House A & C were rented and B had no rent and no expenses.
In the meantime, my husband and I purchased more rental houses, on the same street, and while we keep them all separated with Trusts, we placed ALL the houses into LLC's for an added layer of protection. We just had too much exposure not to do something! So now my mom's irrevocable trust owns the LLC which owns the 3 houses.
All 3 CPA's filed differently. The VA Trust is in essence a Caregiver Trust. My mother pays me her entire income every month to take care of her and pay her expenses. Before she went into AL, I was paying gobs of taxes on the money that I wasn't spending on anything but taking in as income and was to be reported on Schedule C. The CPA didn't want to do it that way, and so she didn't - even with my attorney who wrote the Trust telling her to file this way! This year has reversed itself and I'm coming out of pocket for her care and have a loss. Which is nice because it reduces my taxes!!!!
The second CPA was just sloppy. The townhouses are all on the same street, so they are quite easily confused. The identifiers are 108B, 108D, 109B, 109D - but not all in the same Trust or owned by the same LLC. I understand and can sympathize with the confusion, but they HAVE to be kept straight. He would pull different amounts each year for the cost of the houses - mixing them up. The VA Trust has to file it's own 1041, while my personal Trust without an EIN can pass through on my own income tax. It really is quite confusing and especially now that the Trusts own LLC's with their own EIN's.
The third CPA filed the Amended Return but, they both put the depreciation on Schedule E, rather than on the K-1. After reading more - it makes perfect sense to place the depreciation on K-1 rather than on Sch E. How in the world do 2 CPA's not know to do this?
Sorry for the long and confusing explanation. Hopefully this will help someone else. These VA Trusts are surprisingly not very common and especially confusing is how to handle the assets held in them.
