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Trust tax year


Max W

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Client with a Revocable Living Trust, died on 12/22/2016.   There were no trust transactions until Jan 2017, which were rental receipts .

Can the, now revocable trust, use a Jan-Dec calender year?  And, if so, can it then use the section 645 election?

TIA

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If you are asking if the initial year can end on 12/31/17, the answer is 'no' because the estate's initial year can't extend beyond 12 months from the DOD.  If you wanted a calendar year for the combined estate & trust, that first period would have been little more than a week and ended on 12/31/16, and the election should have been made by filing it with the initial return by the due date that would have been 4/15/17, or the extended date that has also run out. 

Since you are just now asking, I'll assume that no fiscal year was chosen for the estate, and no extension filed. Even if the estate chose the very latest fiscal year of 11/30/17, unless it got an extension the return is already late, so the 645 election is not be possible at all now no matter what year end is chosen.

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4 hours ago, Randall said:

But would the estate or trust be required to file a return for 12/31/16 with no activity?

 

 

I considered that, but for the election to be valid, it would have had to be made during the initial tax year.  It's clear in sec 1.645-1(c)(1)(i). Here is that paragraph from the cite with the specific sentence bolded that answers point. Please note that it says "first taxable year of the related estate (regardless of whether there is sufficient income to require the filing of that return)":

Quote

(c)The election -

(1)Filing the election if there is an executor -

(i)Time and manner for filing the election. If there is an executor of the related estate, the trustees of each QRT joining in the election and the executor of the related estate make an election under section 645 and this section to treat each QRT joining in the election as part of the related estate for purposes of subtitle A of the Internal Revenue Code by filing a form provided by the IRS for making the election (election form) properly completed and signed under penalties of perjury, or in any other manner prescribed after December 24, 2002 by forms provided by the Internal Revenue Service (IRS), or by other published guidance for making theelection. For the election to be valid, the election form must be filed not later than the time prescribed under section 6072 for filing the Form 1041 for the first taxable year of the related estate (regardless of whether there is sufficient income to require the filing of that return). If an extension is granted for the filing of the Form 1041 for the first taxable year of the related estate, the election form will be timely filed if it is filed by the time prescribed for filing the Form 1041 including the extension granted with respect to the Form 1041.

 

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14 hours ago, WITAXLADY said:

so my client that died in July 2017 - he is still ok? as we are just doing his 2017 personal?

thx D

His personal return would include only income up to date of death.  If a trust or estate return is necessary, you can elect a fiscal year (ending June 30, 2018) or calendar year (ending 12/31/17.)   Both methods are still timely.    Calendar year would be due 4/17/18.   Fiscal year would be due Oct 15, 2018. 

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2 hours ago, Burke said:

His personal return would include only income up to date of death.  If a trust or estate return is necessary, you can elect a fiscal year (ending June 30, 2018) or calendar year (ending 12/31/17.)   Both methods are still timely.    Calendar year would be due 4/17/18.   Fiscal year would be due Oct 15, 2018. 

Client died in Dec 2016.  (see initial post)

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I just had this same issue turn up in the mail from an executor for a client that I thought I was done working on. Taxpayer passed away in 12/16. I filed the final 1040 and some attorney was supposed to be handling the estate according to the out of state executor. Today I get a bunch of 2017 1099s all in the taxpayers name and SS#. YEA!!! I have to track down the executor and find out what the heck happened to the "estate" and explain that there is no 1040 for 2017 and see if there is a federal ID # for the estate. You would have thought that the executor would have called me before just dumping the stuff in the envelope with no note or phone number. :angry:

 

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You elect the a 12/31 year end by filing the return with a 12/31 year end date. 

In fact, for the fist year, you can chose any short period less than 12 months,  that is powerful planning tool that can be used for timing income and expenses of the estate and distributions to the beneficiaries. 

Another planning consideration is the option to choose an accrual accounting method.

Good luck.

 

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