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The Sale of Home in a Trust

If the sale of a home for personal use was sold in a Trust and there was no gain (in fact  there was a loss) where on a 1041 Trust tax return would this be shown and if the principal from the sale was distributed to Beneficiaries, likewise, where would this be shown on the tax return?  Thanks!

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8 Replies
M-MTax
Level 11

The Sale of Home in a Trust

Principal distributions would not be shown on the K-1s to the beneficiaries.

 

Losses on personal use property are not deductible, nor could such losses be used to offset gain on the sale of any other trust assets.

The Sale of Home in a Trust

Even though a loss on a home in a Trust  is not deductible I would think that a loss or gain goes on Schedule D and Form 8949 (Sales and Other Dispositions of Capital Assets) If the 1041. Is that correct?  If the principal from the home sale is distributed to the beneficiaries where does it go on the 1041? Thanks!

M-MTax
Level 11

The Sale of Home in a Trust

Principal distributions from trusts are not reported on federal income tax returns.

M-MTax
Level 11

The Sale of Home in a Trust

Even though a loss on a home in a Trust  is not deductible I would think that a loss or gain goes on Schedule D and Form 8949

 

Yes, it is reported but the loss is not recognized.

The Sale of Home in a Trust

@M-MTax  You said that “Principal distributions would not be shown on the K-1s to the beneficiaries.”. But are they reported anywhere on the 1041? Thanks!

 

M-MTax
Level 11

The Sale of Home in a Trust

They can appear on Line 10 of Schedule B but typically are not.

The Sale of Home in a Trust

Interesting… So if  not on line 10 of the 1041 or not on the K-1 the IRS doesn’t care if they don’t know that the principal was distributed? That seems kind of  strange since the IRS always wants to know everything 😂

 

Thanks.

M-MTax
Level 11

The Sale of Home in a Trust

Yeah, they don't really care because there's no opportunity for extracting money via taxation.

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