Simple Trust

[globug666]

My brother and I inherited a home when my Mom passed away and at the beginning of 2023 we put that home in a trust.  It is s simple trust. We began renting it out in Feb of 2023. My questions:

• Do we need to file a 1041?
• Do we depreciate the property? If so, what do we use for the figure?
• Do we both get K-1's from the trust(even though the expenses exceeded the costs?

I am a bit lost on this?

[globug666]

Sorry it says in the docs it is a Trust Estate?

[tagteam]

There is no such thing as a "trust estate". There are trusts and there are estates, which are separate entities.

Regardless, no one here can read the terms of the trust (or whatever document was drafted), but a 1041 would be required to be filed unless the trust is a grantor trust.

See https://www.irs.gov/instructions/i1041#en_US_2023_publink1000286018

[globug666]

I am sorry I was reading the wrong document.  It is a revocable trust that we have, I am new to these things.  So we have to file the 1041.  Do we get K-1's from it that we need to put on our personal taxes?

Also, does Turbo Tax prepare 1041's?

[tagteam]

Revocable trusts are generally grantor trusts and, as such, are disregarded for federal income tax purposes.

The grantors of such trusts are treated as owners of the trusts' assets and report income, gain, expenses, etc. directly on their individual income tax returns (1040).

Depending upon whether you applied for and received an EIN for the trust, there are optional methods of reporting.

See https://www.irs.gov/instructions/i1041#en_US_2023_publink1000286019

[globug666]

Yes, so we have an EIN, our attorneys filed for that.  

So we have to wait until the trust is done to file our personal taxes, correct?

Does Turbo Tax prepare Trust returns?

[tagteam]

Yes, if the trust is a grantor trust, then you would file a 1041 and would each receive a grantor information statement (GIS) that you would use to report the income, expenses, et al, on your individual income tax returns.

If it were otherwise (ask your attorney how it was set up), then you would file a 1041 and you would each receive a K-1 (1041).

Either way, you could use TurboTax Business to prepare the 1041 (but you need another product to prepare your 1040).

See https://turbotax.intuit.com/small-business-taxes/cd-download

[globug666]

Thank you for your help.  I want to hire Turbo Tax do do this.  Do they need to depreciate the property?

[tagteam]

Yes, depreciation deductions should be taken on the property (the house).