Is there a way to notify IRS of a Trustee filing a Schedule D for Capital Gains? Should I be concerned at all?

Forum|Forum|3 years ago
May 6, 2023
1 reply
1 view

I have mentioned this here before. My brother is the Successor Trustee and he and I don't have a good relationship so I'm skeptical about he did the taxes and if can come back to bite me in anyway.

In any event, I was of the belief he had to file a 1041 for a completed Trust/Estate sale we split the proceeds on which was $540,000 total and I got roughly $270,000 I thought it would be filed on a 1041 and I would get a K-1 and pay my half pf the taxes.

However, he did an 8949 and 1040 Schedule D form and a CA Form 540 C-1 ( I think that is a the equivalent of a 1040 or 1041 for the State of CA.) He's doing it to play a martyr in way and to be able to say he paid all the taxes. Long story the point is I'm not trusting how he did it and if I can be held accountable on these taxes or if me not claiming anything on this amount and the capital gains can negatively impact me in the future.

The capital gains (I believe long term right?) was $8,240 total and he said he paid $2,437 which I see as a 29.5% right?. He said he paid $223 on $613 I believe for the state which is a 37% tax rate correct? He makes pretty good money at around $160k a year. Would this tax rates make sense?

Also, is there a way when I file through Turbo Tax on specific form to comment on or anywhere else beyond calling the IRS and CA. state to inform them of this and the amount I received and the capital gains along with the EIN numbers etc on the 1099-S so I am not making any mistakes or getting not doing something right? Should I even worry about that if it was done this way? It feels odd that I would not have to report anything but two tax professionals already told me not to worry about it. Should I ask him to send me some kind of confirmation of his taxes being accepted. I just don't trust him and this seems like it's going to come back to me.

Not A Product Question

Mike9241

Level 15

for one thing, if he extended the trust return he has until 9/15/2023 to put in the mail any k-1 issued by the trust. we can't see the return so don't know what he did. the taxes seem high but again we can't see the returns. as Trustee he had 2 choices. One. pay the taxes on the income at the trust level and distribute the remaining proceeds to the beneficiaries tax free - there would be no tax reporting for the beneficiaries. Two. distribute the income to the beneficiaries via a K-1 and let them pay the tax. It is possible he allocated all the income to himself so you would receive no k-1 but the propriety of that is an open question. It could be an issue for you. Calling the IRS/CA or an attachment would probably be a waste of time and would not protect you. if you want to rest easy spend the money on a lawyer.

Mike

PJhikerAuthor

Level 5

I feel like I pretty much explained what he did. What other information would you like? He paid me my half of the money after he sold the house minus the closing costs in 2022. He filled out what he needed to do on a 1099-S and I have a copy of that. he then waited until 2023 tax season and instead of filing a 1041 and getting me a K-1 for the house he said he paid all the taxes himself and have me those numbers and said if I wanted to I could pay half. He sent me he how he did it and it is through a 1040 Schedule D which is a Capital Gains/Loss vs. a 1041 which ia form for a Trust/Estate Sale and giving me a K-1. He also said if I don't pay him half he does not care.

My question is did he do something wrong on this in regards to me. Am I going to be in trouble and dod I need to claim anything because others tell me different things? I have not filed my taxes as of yet and wan to do it right.

Anonymous_

Level 15

I am not certain what you want from this forum, but there is no possible way anyone here can provide you with a definitive answer without seeing any documentation.

If you are seriously in doubt, you need to consult with local legal counsel who can review the case. As a beneficiary of the trust, you are entitled to an accounting.

On a cursory glance, the amount of tax your brother paid on the amount of gain (long-term) stated sounds rather high. Had he filed a 1041, the tax on that capital gain (assuming no other income) would have been much lower.

Again, and no offense intended, if you want a definitive answer, you will have to contact a local tax or legal professional who can review the relevant documents and, frankly, you will not be able to get any kind of definitive and authoritative answer by repeatedly posting on this board.