Christian

I went to the solutions center before and still see no reference to the community board.

I believe this info provides the answer. A beneficiary succeeding to the property of a trust or estate is allowed any Unused Capital Loss Carryover(s), that remain upon termination of a trust or estate. The amount of the capital loss carryover that can be reported to beneficiaries is still subject to the trust or estate's reporting on the Final Return (Form 1041) of any amount of the current year's capital loss (or capital loss carryover) that is permitted in that tax year. If the trust or estate's capital losses including any carryover capital losses exceed their capital gains on the final tax return, the excess capital loss up to the annual limit of $3000 is deducted on the Final Tax Return (Form 1041). As 2020 is the final year for the trust the loss can be passed on. Some time back I had the same scenario with a client mother's final filing in which the loss incurred was allocated between the two heirs and is used $3000 per year by each until used up. I suspect I can use either her dod or the date the trust acquired the shares.

They have a loss. Can the losses be reported on their individual K-1 forms for use on their 2020 individual tax returns and if they can use the losses which date is used for basis the date the shares were placed into the trust or the grantor's date of death 12/17/2018 ?

That clarifies that. The trust will be disolved this year. All that was left for the year 2020 was the sale of two issues of stocks amounting to about $4,000. Is the basis for these securities the date of the mother's death or the date they were taken into the trust. Either way there will be a loss on both sales. Lastly is this loss allocable to each heir for reporting on their indiviodual returns for 2020 or is it simply lost in which case there would be no need to file a trust return for 2020 as there would be no income received in excess of $600 or more ?

After a bit more reading I came upon this "Grantor trusts automatically convert to non-grantor trusts upon the death of the grantor because the grantor is no longer alive to file a tax return. Any distributions made by the trust at that time would be taxable to the beneficiaries who receive them". I rather think this is the answer I am searching for and I check the Simple Trust box and wrap this up. What do you think?

I thought I had this trust matter concluded but on filling in the Form 1041 I am left unsure which box to check for the trust description. We used the decedent's social security number and filed trust income on her personal return through the year of death. Now that she is gone the trust will need to report income for two years 2020 and 2021 and will be disolved thereafter. The income after deductions is distributed to her two children each year. All of this is no problem my concern is that this looks to be a simple trust whereas a grantor trust has a more complicated filing structure which I simply am not going to tackle.

Thanks to two Belles for your responces.

Thanks Gail. I'm going with the lower amount. If the Department of Taxation has a problem with the reporting I am certain they will holler :).

I was deterred by this from the Form 1041 instructions. Ownership costs. Ownership costs are costs that are chargeable to or incurred by an owner of property simply by reason of being the owner of the property. These costs are commonly or customarily incurred by a hypothetical individual owner of such property and are not deductible by an estate or non-grantor trust. Under section 67(b), they include, but are not limited to, condominium fees, insurance premiums, maintenance and lawn services, automobile registration and insurance costs, and partnership costs deemed to be passed through to and reportable by a partner. Other expenses incurred merely by reason of the ownership of property may be fully deductible under other provisions of the Code. Since this is a grantor trust it seems to me they are as noted in your reply fully deductible.

A client has brought me a W-2 showing $46,959 in Box 1 and $52,650 in the Social Security and Medicare tax boxes. I plan to ask her but I think this is for health insurance carried through her employer likely through a Cafe 125 arrangement. However, her Virginia wages are shown as $52,650. The ATX program shows her federal and Virginia wages as $46,959 but I am concerned that I should report her Virginia wages as $52,650. What do you think?

I now with the assistance from youall have this matter in hand with one exception. The trust holds a residence on a lake which is not rented (the parent's owned tthe property). With disolution of the trust this year it will pass to her two children. Are there any costs connected to this property other than real estate taxes which are deductible on the Form 1041 such as a recent fee payed to the local association for maintanence and such? I suspect repairs would not be but it never hurts to ask relavent questions.

That information is most helpful. The daughter is the trustee so I will work with her. There is a glitch in that the lawyer setting up the trust advised that the trust could use the mother's social security number for the trust. This caused no problem with her final return. However, an insurance company refused to pay on a policy until the trustee obtained an ein which she did. Now for tax reporting we have what ? two eins. I plan to use the ein she applied for although the interest reported to the trust by other payers show her ssn. Maybe I should show the social in parentheses after the ein.

A client set up a trust for her mother who was in mental decline fearing she might need to be placed in a nursing home and would exhaust her assets. Under advice of her trust attorney she used her mother's social security number instead of obtaining an ein for the trust. All tax reporting forms indicating a trust used her social which worked ok. The mother died in December 2018. Th client left the trust in place insted of disolving it with the result that after her death income has fallen into the trust. I normally do not prepare trust returns but in reviewing Form 1041 there is a checkbox to use for that purpose. The income is dividends and interest and will simply be shown as passed through to the heir for her return. The trust will be disolved this year with assets being passed to the client. My question do I use the calndar year of 2019 for the trust year? If not since she died in December 2018 what twelve month period do I indicate ?

I agree Eric and that is what I will use. The Pell Grant fills that bill leaving some $705 of uncovered qualified expense which the dad covered by payments and loans. Thanks to all for all assistance. Having yall's assistance to clarify this was much appreciated.

Thanks to all for your input. It looks like I will be able to get the client an AOC credit. Two of his scholarships are unrestricted meaning they MAY be used for meals, room & board non-tuition expenses. They do not HAVE to used for these expenses. To my mind these amounts may be credited to his daughter which will produce no taxable income to her and $1685 of fee income dad covered becomes eligle for the credit. The federal instructions are typically difficult to understand. My last qualm is if these scolarships HAVE (are required) to pay for these non-tuition expenses as opposed to MAY to qualify as taxable income. The Pell Grant is open ended and does not REQUIRE that it be used for non-tuition costs as is the other scholarship. Any clarification on this final point is appreciated.

Aftermuch head scratching. The client had $5,950 in qualifying education expense in 2019. He received $2,223 in scholarships which were unrestricted meaning they could be used for any of his daughter's expenses. The amount I can prove he paid would be $1,685 in mandatory fees (he paid for books but can't segregate the checks). My problem now is the ATX program shows all expenses covered by the scholarships and is tax free income and I can't transfer the $1,685 to the education credit federal form.

I have asked him to bring me a copy of the scholarship to determine it's full requirements. A guess is it will require coverage of tuition leaving about $2000 for other use. I am making the assumption (not a great idea in this line of work) that if he used this part for books , fees, etc that part can be used for the AOC with any residual reported under the daughter's return if filed. I am also assuming I would need a billing statement from the burser's office to prove this just in case? Of course, a call to the practitioner hotline yielded the advice that the entire scholarship is tax free and this will need to weigh on my final determination as I don't want any possibility of an IRS problem. On that basis he gets no credit and there is no need to even report info from the 1098-T.

Once more into the breach dear friends. Lion I gather from your post I can add the ENTIRE scholarship to the daughter's return as income reported by her even though she did not work. In doing so she would incur a tiny tax liability. Her father then can claim the AOC even though his child's entire college expense except room and board is covered by her scholarship? Good grief am I dreaming? And just so you will know I am already their hero. Where in the instructions is this written?

First, I would like to thank all of you responding. The parent does not qualify for any credit or tuition and fees deduction by my lights since his tuition was fully covered by the scholarship. The remaining scholarship amount in excess of the tuition was used to buy books, fees, etc. This exhausts the entire amount. I plan to file dad's return and simply not claim the credit as his expenses at the college amounts to what he is paying for room and board. I regard him as a lucky dad having much of this huge expense covered by scholarship funds. I do not see a large number of returns using these education credits so this forum is a godsend for an aging coger.

That may not be correct. I am listening to the impeachment hearing and mulling tax problem at the same time. I have figured that no credit or or additional tax is due since the scholarship amount in excess of the tuition was used for fees, books, and instruction materials. However this leaves a question as to the legality of simply adding the full amount of the scholarship into the parent's income. I seldom encounter a payment of a scholarship in excess of the tuition charged by the college hence my concerns to get it correct.

If I include the entire scholarship in dad's income the resulting credit produces a much higher refund. If memory serves me this is allowed. I am thinking it would be entered on the other income line of the Form 1040.

How does one make this election as the daughter had no income in which case a filed return would indicate no tax due unless the full amount is allocated to the daughter? I am unfamiliar with this provision of the credit.

A client has come in with his Form 1098-T his daughter having entered college in September of last year. His tuition expense was some $4,200.00 which was covered by a scholarship his daughter received of some $6,400. He is paying some $400 monthly for room and board. The amount by which the scholarship exceeds the tuition is my question. Is it considered taxable income. I have been reviewing the relavent IRS material on the credit but have not resolved this as yet.

Was unaware we had a Supreme Guru. I feel more secure. A post of mine a few years back returned almost thirty responses and hardly anyone agreed with anyone else as to the correct answer.

Nope it was the Cadillac tax they are discussing.