Irrevocable Trust

[tamrec]

My father passed away July 2020 and I became the successor trustee of the family trust. The trust is now irrevocable. The trust was limited income-producing as it only held his house, cars, life insurance policies,  a savings, and a checking account. We sold the house ASAP after waiting forever during COVID to get an EIN for the trust and having many things repaired for the sale. We sold for $5000 under the newly appraised value. I am still sorting out things in the trust but I did pay out myself and my brother for the proceeds from the sale of the house. My questions are:

1) What form(s) do my brother and I need to fill out to show the sale of the house and each take a $2500 loss on the sale? I assume we do this on our personal 1040s, but then how does this impacts the trust tax return that I need to file (it at all)?

2) How do I get started on the trust tax return?

Thanks to anyone that can help answer my questions!

[Carl]

If that house was not business property of some type (such as rental property) then losses on the sale of personal property are not deductible. I assume the house remained in the trust until sold and title was transferred to the buyer. If that assumption is correct, then that's why I say "we" did not sell anything. The trust sold the house and the sale would be reported on the 1041 trust return with any gain or loss based on the stepped-up cost basis of the property.

[tagteam]

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@tamrec wrote:

2) How do I get started on the trust tax return?

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If the trust has any taxable income (or $600 or more in income, whether taxable or not), the fiduciary is responsible for filing an income tax return for the trust (Form 1041).

You might want to consider professional guidance.

See https://taxexperts.naea.org/listing/service/estates-gifts-trusts