Irrevocable Trust Tax return

[Anonymous_]

In its final year, a trust can elect to have estimated tax paid treated as made by the beneficiaries (file Form 1041-T), but not tax withheld).

Regardless, if the trustee pays estimated tax from the trustee's personal funds, that would be considered to be a gift to the beneficiaries.

As @Critter-3 mentioned, professional guidance is highly recommended; the trustee is a fiduciary and is held to that standard of care.

[mitchden1]

As a clarification, the Trustee is the daughter of the deceased and per the Will, a significant beneficiary (50%). The 50% will be significantly more than the Trust tax liability. There are no estimated taxes paid. The taxes due will be paid when the initial/final Irrevocable Trust tax return is filed before April 15, 2023. I spoke to a CPA and an estate attorney. Both told me that the taxes due from the Trust can be paid from a personal checking account.

[Anonymous_]

Yes, well those additional facts change the landscape and more than slightly, in which case they are correct.

[mitchden1]

I have 1 other question. The tax accountant told me that there's a 90-day rule where I can change the date of the cost basis. The step-up cost basis was the value on the date he died. His equities were sold 10 days later and the market had gone up and as a result, the Irrevocable Trust account shows a long term capital gain.

Can I change the date to increase the cost basis and reduce the Trust tax liability? That doesn't make sense as I could then reduce the Trust capital gain and not pay any taxes.  I probably didn't understand what he told me.

[Anonymous_]

There is no "90-day rule" with respect to the stepped-up cost basis.

There is a 6-month rule (aka the alternate valuation date) but that only applies if the estate is very large and using the alternate date would both reduce the size of the estate and reduce the amount of federal estate tax owed.

[NCperson]

agreed; there is no 90 day rule, but you do get the benefit of long term capital gains.....even if some of the stocks were purchased within 365 days of the date you sold the portfolio.  (i.e. everything that was 'stepped up' avoids short term gain, even if held less than a year).