topic Filing LLC tax return when one of the members is a trust that has 3 members in Business & farm

Filing LLC tax return when one of the members is a trust that has 3 members

yodankful — Mon, 08 Mar 2021 00:34:27 GMT

one of the members of the LLC is a trust that has 3 members, all equal owners of the trust. Do we need to declare each member of the trust as as an owner of the LLC? so turbotax will issue a k-1 to each individuals SSN?

Or do we add the trust as an owner/member? and if so, since turbotax will only issue 1 k-1 in that instance, how does each individual declare it on their tax return?

Re: Filing LLC tax return when one of the members is a trust that has 3 members

Anonymous_ — Mon, 08 Mar 2021 00:43:19 GMT

@yodankful wrote:
Or do we add the trust as an owner/member? and if so, since turbotax will only issue 1 k-1 in that instance, how does each individual declare it on their tax return?

Add the trust as a member. The trustee of the trust will then report the K-1 from the LLC on the trust's income tax return (Form 1041) and, in turn, the trust will issue each beneficiary a K-1.

Re: Filing LLC tax return when one of the members is a trust that has 3 members

npierson7 — Mon, 08 Mar 2021 00:51:03 GMT

You need to issue Form K-1 to each member of the LLC, regardless if they are individuals or entities. Then it is members' responsibility to report that income or loss on their tax returns. In you case, the trust will issue their K-1 to their members.

Re: Filing LLC tax return when one of the members is a trust that has 3 members

yodankful — Wed, 17 Mar 2021 16:50:23 GMT

Okay so filing the returns but the trust type is a Grantor Trust, not a simple trust. So the Grantor Trust does not issue schedule k-1s but does send the share of income across each Grantor. How can each grantor now declare this income from the Grantor Trust on their Individual tax returns without the k-1?

Re: Filing LLC tax return when one of the members is a trust that has 3 members

Anonymous_ — Wed, 17 Mar 2021 17:24:03 GMT

@yodankful wrote:

How can each grantor now declare this income from the Grantor Trust on their Individual tax returns without the k-1?

A grantor trust would issue a GIS (grantor information statement, aka grantor letter) which details all items of income, gain, deduction, credits, etc.

Re: Filing LLC tax return when one of the members is a trust that has 3 members

yodankful — Wed, 17 Mar 2021 17:34:03 GMT

Okay, all that is on there is income, from profits from a partnership (llc). Where does this information get entered on the personal tax return? It seems there is no clear place/section for it

Re: Filing LLC tax return when one of the members is a trust that has 3 members

Anonymous_ — Wed, 17 Mar 2021 18:35:18 GMT

It depends upon the level of participation and involvement of each member.

If this is income from self-employment (the members provide services on a continuing basis), then they should probably be filing a Schedule C to report income and expenses.

If they do not materially participate, it is passive income subject to ordinary income tax rates (for a GIS, this could be reported as miscellaneous, or other, income).