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There is no tax on transfer of trust corpus to the beneficiary.

Got one of those last week. Deleted it asap

Thanks for the reply, Judy. As I have been electing to have gains recognized by the beneficiary, I was fairly certain that the distribution of some of the assets would not trigger any gain until the bene sold with the original carryover basis to the trust. I just couldn't find a cite on point but likely was not using the correct search terms. Bottom line is that the bene has been responsible for cap gains tax on any sales to date and that would continue whether sales were in the trust or distributed to her. The next issue is processing paperwork with her brokerage firm to get this accomplished. Oh well, I'll just see what they send and deal with it then.

Rita, you are apt and daring, like a firefighter, knowing whether to go in or get out. But most of all, smart!

Just got email from NYS about driver license requirement for 2016 tax return preparation. Having trouble viewing this email? View it as a Webpage. Tax Year 2016 NYS Driver License Requirement: Overview and FAQs The New York State Tax Department, in partnership and collaboration with the IRS and other states, continually assesses and improves its fraud deterrence systems for the mutual benefit of the State and its taxpayers, including the tax professional community. This year, we’ve taken the step of requiring an additional verification measure in personal income tax preparation software: the collection of driver license and state-issued ID information. Historically, our process of informing the tax preparation community about new requirements has been to communicate and work with tax preparation software developers; test for their compliance before approving; and then notify tax professionals upon issuing each year’s updated Publication 93, New York State Personal Income Tax Modernized e-File (MeF) Guide For Return Preparers For Tax Year 2016. This year, through the attention of the tax professional community, we’ve recognized an opportunity to enhance our communication with this group to provide accurate and consistent information about upcoming changes such as this requirement. The Driver License Requirement for Tax Year 2016 document, also available on the Tax Professionals landing page, is one of multiple communications steps we’re taking moving forward. Some of you will receive this email more than once, as you belong to multiple professional communities. Please pardon the duplication. Contact us Recent additions Online services

WASHINGTON – The Internal Revenue Service, state tax agencies and tax industry leaders today warned tax professionals to be alert to an email scam from cybercriminals posing as clients soliciting their services. A new variation of this phishing scheme is targeting accounting and tax preparation firms nationwide. The scheme's objective is to collect sensitive information that will allow fraudsters to prepare fraudulent tax returns. These latest phishing emails come in typically two stages. The first email is the solicitation, which asks tax professionals questions such as "I need a preparer to file my taxes." If the tax professional responds, the cybercriminal sends a second email. This second email typically has either an embedded web address or contains a PDF attachment that has an embedded web address. In some cases, the phishing emails may appear to come from a legitimate sender or organization (perhaps even a friend or colleague) because they also have been victimized. Fraudsters have taken over their accounts to send phishing emails. The tax professional may think they are downloading a potential client's tax information or accessing a site with the potential client's tax information. In reality, the cybercriminals are collecting the preparer's email address and password and possibly other information. The IRS urges tax professionals and tax preparation firms to consider creating internal policies or obtain security experts' recommendations on how to address unsolicited emails seeking their services. One tip: Never respond to or click on a link in an unsolicited email or PDF attachment from an unknown sender. As the IRS, states and the tax industry make progress in the fight against identity theft, cybercriminals are becoming more sophisticated in their efforts to steal additional client information. Criminals need more data in their effort to impersonate clients and file fraudulent returns to claim refunds, and schemes like this can help in this effort. Read more at Protect Your Clients; Protect Yourself, the Security Summit initiative to increase awareness about the tax professional community. https://www.irs.gov/uac/newsroom/security-summit-alert-new-two-stage-email-scheme-targets-tax-professionals

Even just since 2013 the paperwork burden has gotten substantially heavier. Good luck with that! A good broker can be a HUGE help.

Beneficiaries do use carryover basis for securities distributed in-kind if no election is made to recognize gain at the trust or estate level. It sounds like there would be no benefit to making that election in the case Margaret describes because the trust has had gains thus far. The election allows recognition of gain at the trust/estate level at the time of distribution, and it must be applied to all in-kind distributions during the tax year and not be applied on an asset-by-asset basis. If this election is made, then the beneficiary would then use a stepped up basis when the security is ultimately disposed of. This strategy may be beneficial when the trust has unused capital losses that could absorb the gain, but Margaret's client doesn't have this scenario, so this would likely not be advantageous. It's also has no benefit if the beneficiary will incur more tax than the trust, if the beneficiary will hold the security for a long time and thereby deferring gain for that extended period, or if planning to hold it until death at which time it would receive the stepped up basis.

They added a new checkbox on both create and print marked organizers to force the letters to be added, even if you had previously discarded them. You would think setting the preference to add the letter would be enough, but you'd be wrong.

I would certainly think so. I cannot imagine any reason for a change. The basis was established on the deaths of the grantors, grandparents, as they were transferred into a family trust then distributed to the sub-trusts. To date, the sales have resulted in some amount of gain but not outrageously so. The first grandparent passed in 2010, the second in 2013.

How can you do your fiduciary duty to both as well as one at a time? Telling wife how much larger her refund will be if she claims all kids would "damage" hubby. Or, telling hubby how much lower his tax balance would be if he filed MFS and itemized instead of MFJ and sharing the balance due or refund would damage wife. How mad at you will one spouse be when the other spouse never chips in for half/a percentage of the balance due or never shares the refund? And, making decisions to get the best result for the family as a whole will damage one or the other.

These days, with email and texting capability, there's no reason to give info to a third party (with the possible exception of a valid subpoena). Email a password protected file toe the client and let them do whatever they wish with it. I have never yet seen a situation in which a third party had a valid reason for obtaining info directly from me. Not that they haven't tried. I've had a couple of bankers to offer silly excuses for getting info from me,, but I risked losing the client rather than cave in.

Thanks, DANRVAN. That's what I was thinking. She will pay tax on the gains when she sells whether in the trust (as I've been electing) or out of the trust after distribution or transfer. Just wanted a second on that. The trust is a sub-trust set up by deceased grandparents. For the first 5 years, bene is permitted to withdraw no more than 50% of assets but does receive all income annually. This bene, one of 5, wants to take out half now and put into her own non-trust, account so as to minimize contact with me and reduce aggravation and time delays when she wants withdrawals. She has not been very nice so I am happy to do this but wanted her to know the ramifications. Thankfully, the five years is up September 2018.

Catherine, I totally agree with you. I only have one of these and we talked at great lengths. I initially told them I could not serve both of them. They agreed that I could and they would not cause any trouble. So far so good. If a situation arises, I can still bail out before preparing either return. To address the OP, I think I may have investigated a written agreement for these situations but will still entertain another if someone has one. Thanks for the word of caution.

Disagree!!! Never, ever, EVER give info to a third party is my policy. Period.

It can still be dicey if there are kids and dependency exemption and child care and tuition involved. You can NOT do those returns without a chance of being caught - you can't, for example, TELL the second-to-come-in that the first already took the kids as dependents with a signed release that you now know the signature was cribbed. Because that is disclosing confidential information. So you're caught again. It could work if their lives are now totally separate (no kids, or kids long grown and gone). But scrutinize these cases with cynicism set at maximum - because one, the other, or both WILL throw you under the bus if there is a problem and they believe so doing will reinforce their personal stance.

Never, ever, EVER give info to a third party without a properly signed Section 7216 disclosure authorization. There are TIGTA rules on paper size, font and font size, wording, etc. But acceptable samples are available online. Without that letter, I won't even confirm to a third party that the client IS my client. But easiest by far is to give it all to the client; then it's their lookout. Yes, if it's extra work for you, get paid up front. If they do need you to send (you have a fax that will handle 50 pages and they don't, for example), get that signed letter first.

I email it all to the client and tell them they can forward it