Trusts and tax returns

[OJB4]

I'm not supposed to have to file a tax return for my trust, right???? My accountant is preparing my taxes and asked if I started a trust...which I did. It's only for my NFA items however and earns NO money.....just owns NFA items which I purchase with my personal money.

Anybody have any prior experience with this?

Thanks

[tsands974]

If it's a revocable living trust, then no.

If it's an irrevocable trust, then yes you will have to file a 1041.

[whiterussian1974]

It's been a loooong time since I reviewed Corporate Tax Law. As I recall, if the Trust is for your benefit, no special reporting requirement.
If you set it up some crazy way, possible inventory reporting on Sch C, F, etc. Either way, no income = no extra taxation.
I'm sure that some will flame my attempt to help. Unless they are CPA, Tax Attorney, or https://en.wikipedia.org/wiki/Enrolled_Agent; make sure they cite specific IRS Pubs.

tsands974 posted while I was typing. He may have better info than me. I'm just going off my research into Commerce Law. Though it was far from exhaustive and I'd love to learn from others.

From reading the Form 1041 Inst, it appears that unless your Trust had $600 Income or is an "Abusive trust arrangement" you shouldn't need to file.
"Abusive trust arrangements often use trusts to hide the true ownership of assets." If you listed yourself as Beneficiary, you shouldn't need to file. (As I understand.)

tsands, please correct me w specific language. I would rather be wrong and corrected, than partially correct.

[whiterussian1974]

Page 4-6 dealing w "Grantor Type Trusts" speaks of "Special Reporting Instructions. See
Grantor Type Trust under Specific Instructions."
Maybe these clarify your requirements?

P 12: "Grantor Type Trusts-
A trust is a grantor trust if the grantor retains certain powers or ownership
benefits. This can also apply to only a portion of a trust. See Grantor Type
Trust, later, for details on what makes a trust a grantor trust.

In general, a grantor trust is ignored for income tax purposes and all of the
income, deductions, etc., are treated as belonging directly to the grantor. This
also applies to any portion of a trust that is treated as a grantor trust."

[OJB4]

Thanks guys, I didn't think there needed be any reporting just based on the fact that the trust earns NO income at all. It is a revocable trust.

Thanks again guys

[tsands974]

whiterussian1974- Your citings are all good, I would have posted pretty well the same thing but I was trying to keep it as simple as possible. There are always exceptions of course, but in OJB4's case, for income tax purposes, his NFA trust is ignored.

I would get more into detail but this is my busy time of the year, as I am a CPA nowadays.

[OJB4]

whiterussian1974- Your citings are all good, I would have posted pretty well the same thing but I was trying to keep it as simple as possible. There are always exceptions of course, but in OJB4's case, for income tax purposes, his NFA trust is ignored.

I would get more into detail but this is my busy time of the year, as I am a CPA nowadays.

Thanks again for your help tsands.....I like the easy versions since I pay a CPA to know the complicated stuff for me.....he wasn't the one questioning if it needed to be filed, but whomever is doing the tax returns on the computer for him.

I knew my fellow silencertalk.com members would have the answers I sought.