Pre-Paid Funeral Expense

[Dfleishman]

I’m talking about a pre-paid Funeral expense package, not a business k1. How do I enter the Interest, Dividends and Capitol Gains using the Premier Turbo Tax?

Dennis Fleishman

[M-MTax]

Those pre-paid funeral deals are set up as trusts so you put the K-1 in as a trust.....look at the form....does it say "1041" anywhere?

[Dfleishman]

No. I only received a Grantor Trust Tax Information Statement. 

[Dfleishman]

Thank you for your help!

[PattiF]

 You do need to enter the information from the Grantor Trust Tax Information Statement. 

The Grantor Letter or Information Sheet is a document that was sent to the IRS, that shows you as a recipient of various forms of income, and possibly having certain deductible expenses. Enter the information listed in the Grantor Letter in the places where you normally would, had you paid or received these items directly instead of through a trust.

You report each income and expense item as if you had received an equivalent 1099, using the name and EIN of the Trust as the payer.  So treat interest as if a 1099-INT, dividends as if a 1099-DIV, Gains and Losses as if a 1099-B, etc.

Some of the more common items and where to add them include the following:

Income Items

Click on Federal Taxes > Wages & Income  [In TT Home & Biz:  Personal > Personal Income ]

• Taxable interest and dividends -  Interest and Dividends > Interest on 1099-INT [or Dividends on 1099-DIV]
• Ordinary income - Investment Income > Stocks, Mutual Funds, Bonds, Other [or one of the other categories listed]
• Capital gains and losses - Investment Income > Stocks, Mutual Funds, Bonds, Other

Deductible expenses
 

1. Click on Federal Taxes > Deductions & Credits  [In TT Home & Biz:  Personal > Deductions & Credits > I'll choose what I work on].
2. Go to the appropriate section, like Your Home > Property Taxes or Charitable Donations > Donations to Charity in 2015.

[Dfleishman]

Pattif12,

Thank you for the information.  I guess I can use this method instead of filing a K-1?  

I understand how to enter the Interest using 1099-INT and the dividend using 1099-Div.  How would I enter the Capital Gains?  Should I go directly to line 7 on the 1040?  Is there an easier way?  Also, how would I enter the Fiduciary Fees Paid as a deduction?

Thanks for you help!!

Dennis Fleishman

[Irene2805]

Your pre-paid funeral fund is set up as a Grantor Trust, where the grantor and the beneficiary are the same person (you).  You receive a Grantor Letter instead of a K-1.

Capital gains are entered on Schedule D.  Please follow these steps to enter the information:

1. Click on Federal > Wages & Income.
2. In the Investment Income section click on the Start/Revisit box next to Stocks, Mutual Funds, Bonds, Other.  
3. If you have already entered some investment sales, you will see a screen Your investment sales summary.  Click on the Add More Sales link. 
4. If you haven't already entered some investment sales, you will see a screen, Did you sell stocks, mutual funds, bonds, or other investments in 2020?  Click the Yes box.
5. On the next screen, click the appropriate box and click Continue.
6. Continue through the screens, entering the requested information.

As to the fiduciary fees, because of the Tax Cuts and Jobs Acts (TCJA), you can no longer deduct miscellaneous itemized deductions such as fiduciary fees on Schedule A for tax years 2018-2025.   You can still enter them in case they are deductible on your state return.

To  enter the fiduciary fees in TurboTax please follow these steps:

1. While in your return, click Federal Taxes > Deductions > I'll choose what I work on  [In TurboTaxOnline: Federal > Deductions & Credits]
2. On the Deductions page, scroll down to the Retirement and Investments section and click the Start/Update box next to Other Investment Expenses.   
3. On the Other Investment Expenses screen, click the blue Yes box.
4. On the next screen, Enter Investment Expenses, enter the fiduciary fees.  

[Dfleishman]

Thank you for your latest suggestions.  I understand when you say how to enter the 1099-INT and 1099-DIV from my Grantor Trust Tax Information Statement.  I'm still a bit confused as to how to enter my Capital Gains Distribution.  At this point I haven't sold any stock of any kind.  I had prepaid my funeral costs and received this statement from the funeral home.  Using my Premier version I enter the Wages & Income, then stocks, mutual funds, bonds.  I'm asked if I sold any investments.  I answer YES.  I'm asked if I received a Brokerage Statement.  I answer yes.  I option for "I'll type it in myself"  I'm asked for the name of the bank or brokerage firm.  I enter the Belkoff-Goldstein Funeral Chapel.  If I then select Enter 1 Sales at a time I'm asked for the following; Description. Date Sold, Date Acquired, Sale Proceeds and Cost of Basis.  However, if I select I'll Enter a Summary for Each Category I'm then asked; Total Proceeds, Total Costs Basis and Holding Period.  This just doesn't seem right.  I do not have this info.  Please clarify? Thank you.

Dennis Fleishman

[M-MTax]

Don't check one sale at a time....check the summary and enter it there...and you can also enter cap gain distr. where you enter 1099-DIV info....there's a line for it.

[lmhebert5]

I and my wife have received a Grantor Tax Advice Letter that contains short term and long term capital gains. how and where do I enter theses items in my Turbo Tax? 

[DianeW777]

The Grantor Tax Advice Letter or Information Sheet is a transmittal document, copied to the IRS, showing you as a recipient of various forms of income, and possibly having certain deductible expenses.

• Enter the information listed in the Grantor Letter in the places where you normally would, had you paid or received these items directly instead of through a trust.

You report each income and expense item as if you had received an equivalent 1099, using the name and EIN of the Trust as the payer.  So treat interest as if a 1099-INT, dividends as if a 1099-DIV, Gains and Losses as if a 1099-B, etc.

Some of the more common items and where to add them include the following:

Income Items

Click on Federal Taxes > Wages & Income  (In TT Home & Biz:  Personal > Personal Income)

1. Taxable interest and dividends -  Interest and Dividends > Interest on 1099-INT [or Dividends on 1099-DIV]
2. Capital gains and losses - Investment Income > Stocks, Mutual Funds, Bonds, Other

Note:  After the Tax Cuts and Jobs Act (TCJA) these expenses are no longer deductible on itemized deductions.

@Imhebert5

[Mammy5]

So, I have no problem entering the interest and dividend from the Funeral trust.  The problem is trying to enter a short term loss and a long term gain.  It's impossible to use the K-1 form and impossible to use the mutual fund/stock entry because they both require original cost which is not included in the Grantor Tax Advise Letter.  If I try to put it directly on the Form 1040 Line 7 and Schedule D line 5 & 12, it Turbo Tax has already gone through adjusting those lines, so how do you simply enter the gain/loss without original cost data?

[DianeW777]

If the Grantor Tax Advise Letter shows only your capital gain and a short term loss (does not include the cost or sales price per se) it can be entered as follows using the same menu: 

1. Capital gains and losses - Investment Income > Stocks, Mutual Funds, Bonds, Other (You did not receive Form 1099-B)

Capital gain - use this as the selling price, with zero cost basis and be sure to select a purchase date that creates long term treatment (more than one year from the sell date).  If you use 12/31/2021 as the sell date then the purchase date must be 12/30/2020 or earlier.

Short term loss - use the selling price of $1 and the cost basis is the loss plus $1.  The date of sale can also be 12/31/2021 and the purchase date can be any date in 2021.

@Mammy5 

Please update here if you need further assistance and one of our tax experts will help.