Revocable Living Trust w/ QTIP - Grantor Died

[jasdlm]

I am completely brain-dead and can hardly function. (I have a State-Registered RIA, and the auditors walked in Tuesday morning for my 'routine audit' because my 'CRD number came up'. I did absolutely no tax returns for 2 days, and my stress level is through the roof.) Go ahead and chew me out for the following, but please answer.

Decedent and Wife (30 year marriage) both executed Revocable Living Trusts in the mid-90s. Both Trusts had QTIP provisions as they each had children from a previous marriage. Both Trusts owned residential and commercial rental property.

Deeds were properly executed. Grantor died the end of December 2008, so 2009 is the first year for the 1041.

Questions:

1) Do I step-up the basis effective with the trust tax return? (This is better for my client, of course, who is the income beneficiary of the trust, but not as good for Grantor's children as a step-up at Spouse's death would be. I think the step-up is now, but I'm not confident.

2) The commercial renters issued 1099s in deceased grantor's social security number (payee on 1099 correctly identifies the trust, but they did not get the tax id number correct). Do I need to get the 1099s reissued? Is there any other way I can show the flowthrough without reissued 1099s? It's quite a bit of money, so I doubt it will go unnoticed.

Thanks in advance.

[baystorm]

In reply to your second question - I have found it difficult to have 1099 reissued by the payor when there are mistakes. I have done this in the past is report the rent on Schedule E and then take a corresponding deduction on Schedule E - it washes out - and then just report on the trust income tax return.

In regards to the first question - where both properties jointly titled in each trust? or did one trust hold the rental and other trust hold the non-rental?

[jasdlm]

Thanks for your response, baystorm. The rental properties were held in Decedent's trust only. They are still there, but the trust is now irrevocable and spouse is an income beneficiary.

Thanks.

[baystorm]

The step up basis would be at the date of death of the decendent or the alternate valuation 6 months later. Depending on how much is money is involved it may be beneficial for the trust to spend some money on a professional appraisal.

Good luck and Have a great week

[jasdlm]

Thanks so much. I really appreciate you taking the time to reply. I will proceed with the basis step-up.