Non-cash distributions from a Trust

[Anonymous]

Hi

My Aunt passed away in a nursing home in January 2020 and i am the successor Trustee.  Her assets are still in the Trust (home, cash).  In order to pay for her care, we rented out the house for 5 years.  The trust leaves all the remaining assets equally to me and my sisters.  With COVID, it took till March 2021 to transfer the deed to us.  

For tax year 2021, i'm filing a Trust Return and recognizing rental income in the trust for the first 3 months of 2021.  Do i also need to take a Section 643 election for the non-cash transfer of real estate?  if yes, how do is show that in the application?  Also, we found out later that there were IRAs that are currently being settled, so the Trust will likely need to file another return for 2022.  

[tagteam · Accepted solution]

You should consult with local counsel and/or a local tax professional for this matter.

A Section 643 election would ordinarily not be required and you are referring to what application?

If the trust was a standard revocable living trust (aka grantor trust), the assets in the trust would have a basis stepped up to their fair market value on the date of your Aunt's death in January 2020.

Is this the first return you are filing for the trust?

[tagteam]

Also, with respect to the IRAs, were beneficiaries named or was the trust named as beneficiary (or was there not a named beneficiary?

[Anonymous]

There were no beneficiaries for the IRA.  That’s also been a challenge to get right with the financial institution.  Lots of paperwork.

[Anonymous]

Thank you!  
with respect to the 643 election, I was trying to figure out how to show the transfer of property to the beneficiaries as it no longer remains in the trust.

yes, this is the first trust return.  

[tagteam]

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@Anonymous wrote:

.....I was trying to figure out how to show the transfer of property to the beneficiaries as it no longer remains in the trust.

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You do not have to report transfers of corpus (assets of the trust) that are simply transferred to the beneficiaries.

[tagteam]

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@Anonymous wrote:

There were no beneficiaries for the IRA.  

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Did you inform the trustee (custodian)? Was a tax reporting statement issued (e.g., 1099-R)?

[Anonymous]

Thanks for the reminder on the 1099R. Will follow up with the financial institution.