rental income from trust property

[hihar1]

Hello Community, I have recently started a living "shared" revocable trust,  my partner and I (unmarried) are the sole trustors and trustees. We have one rental property  under the trust. I have seen a recent post here when there is a single trustor/trustee of a living trust where the Community reply indicated the income in that situation  i.e. single trustor/trustee living/revocable is entered via turbo tax on their individual return, I'm assuming Schedule E. My question is, does the same thing apply to both my partner and I? i.e. can we just split the income/expenses from the trust rental on our respective schedule E's or, as I have read elsewhere, do we instead have to fill out Form 1041 and send ourselves a 1099 MISC  or K-1? or being more than one trustor/trustee are we stuck with reporting all the income on the 1041 and paying the ridiculous trust tax rates on that?.  Again same situation as the taxpayer in the link below, except there are two of us. Thank you in advance...

here's the link mentioned above:

https://ttlc.intuit.com/community/taxes/discussion/reporting-rental-income-for-a-house-under-a-trust...

[M-MTax]

The trust can still be treated as disregarded so you file SCH E and not have to file a 1041. Use Option 1 

[hihar1]

Thank you for reply, I have read the link from the IRS; Option 1 states "as owned by one grantor or by one other person", we are two persons.  so in my mind that triggers Option 3, which requirements are different than option 1. Option 3 requires a TIN for the trust, which I would assume requires a 1041 be filed as well. Of course I am reading everything in pure literal terms, here are both;

Optional Method 1 

For a trust treated as owned by one grantor or by one other person, the trustee must give all payers of income during the tax year the name and TIN of the grantor or other person treated as the owner of the trust and the address of the trust. This method may be used only if the owner of the trust provides the trustee with a signed Form W-9. In addition, unless the grantor or other person treated as owner of the trust is the trustee or a co-trustee of the trust, the trustee must give the grantor or other person treated as owner of the trust a statement that: ---

Optional Method 3.

For a trust treated as owned by two or more grantors or other persons, the trustee must give all payers of income during the tax year the name, address, and TIN of the trust. The trustee must also file with the IRS the appropriate Forms 1099 to report the income or gross proceeds paid to the trust by all payers during the tax year attributable to the part of the trust treated as owned by each grantor, or other person, showing the trust as the payer and each grantor, or other person treated as owner of the trust, as the payee. The trustee must report each type of income in the aggregate and each item of gross proceeds separately. The due date for any Forms 1099 required to be filed with the IRS by a trustee under this method is February 28, 2024 (March 31, 2024, if filed electronically).

[M-MTax]

That's correct if this is a joint trust. Anyway, the trust is still treated as a disregarded and you can still file income and expenses on SCH E.......you just need to file a 1041 with a GIS.

[hihar1]

Thanks again... So when you say joint trust, then that would be us, correct? two trustors with a shared revocable living trust (who are also trustees). 

And, if I understand correctly, even though we can enter the actual rental income/expenses on our Schedule E's we would still need to file the 1041 with what I assume are two GIS forms? (one each).  And finally, do we have to file a1041 and GIS for every year we have rental income on that property?  if all that's correct is there anyway around that? We were hoping not to have to use an EIN number, which is required for a 1041.

[M-MTax · Accepted solution]

So when you say joint trust, then that would be us, correct? 

Yes.

we would still need to file the 1041 with what I assume are two GIS forms? 

Yes.

do we have to file a1041 and GIS for every year we have rental income on that property?

Yes.

if all that's correct is there anyway around that?

Yes, all of that is correct and, YES, there is a way around that; you should each have your own individual revocable trust.

[hihar1]

Very, very helpful. Thank you!