Tax Prep by Deb Posted February 28, 2011 Report Share Posted February 28, 2011 I have a client whose grandmother had set up a living trust (grantor trust) along time ago. The only asset was an annuity. The client's grand mother passed away in 2009 and a personal return was filed for her in 2009. Because she died in November, it took my client several months to get the funds released from the annuity. She and her father are trustee's. For 2010 the only thing that has come in is a 1099R for the annuity distribution. It shows it as a total distribution . Box 1 $264,413.91 and box 2 (Taxable amount) is zero. We have confirmed that there is no taxable amount. My question is what do I need to do with this if anything? The money was split equally between the two trustees. I don't really see any place on a 1041 to put it. I've never done one of these before, and I just don't know how to proceed. Any help will be greatly appreciated. Deb! Quote Link to comment Share on other sites More sharing options...
Tax Prep by Deb Posted March 1, 2011 Author Report Share Posted March 1, 2011 Please help. Deb! Quote Link to comment Share on other sites More sharing options...
samingeorgia Posted March 1, 2011 Report Share Posted March 1, 2011 Now -- are you certain that the taxable amount is zero? A lot of annuity companies leave the taxable amount blank and it's up to you to determine the taxable amount. Amounts in excess of the investment in the contract are taxable as ordinary income (assuming that it was bought with after-tax money). However, since you said that this was a total distribution, maybe the surrender charges bring the distributed amount below the amount invested.... You mentioned that the trust was set up a long time ago. Check the grandmother's tax records to see what the investment in the contract was and how she was reporting the annuity. I really doubt that there's no taxable income. Quote Link to comment Share on other sites More sharing options...
Tax Prep by Deb Posted March 1, 2011 Author Report Share Posted March 1, 2011 We have confirmed that the distribution was only the return of her investment. The surrender charges ate up all of the earnings. She had been drawing on this annuity for sometime and we have been filing a 1040 for her with the 1099R income, and up until the surrender there was a taxable amount. I am certain that the 1099R is correct as we have called and discussed it extensiveley with the company that issued it. This was money that was invested in this annuity when grandma sold her home. It was used for her care while alive as she was living in a extended care facility. So again my question is if there is no taxable amount, Do I even need to file anything and if so what? Any help would be greatly appreciated. Thanks, Deb! Quote Link to comment Share on other sites More sharing options...
Gail in Virginia Posted March 1, 2011 Report Share Posted March 1, 2011 My concern would be that even if there is no taxable amount, there is a gross amount and most filing requirements are based on gross amount. However, I am not sure what would be filed either. If the annuity went into the grantor trust upon the death of granny, then the trust might have a filing on a 1041 for the surrender of the annuity. To whom is the 1099R addressed and does it have granny's SSN or the trust's EIN? If it is granny's SSN, and the taxable amount is zero, then including it on her final return won't hurt her and might make the IRS happy because everything matches. I hope someone with more experience answers as well. I don't do a lot of trust work. Quote Link to comment Share on other sites More sharing options...
Tax Prep by Deb Posted March 2, 2011 Author Report Share Posted March 2, 2011 Only way the annuity would pay out was to the trust. The trust did establish a EIN of it's own and it is reported on the 1099R. Deb! Quote Link to comment Share on other sites More sharing options...
Tax Prep by Deb Posted March 2, 2011 Author Report Share Posted March 2, 2011 Pretty Please? Deb! Quote Link to comment Share on other sites More sharing options...
kcjenkins Posted March 2, 2011 Report Share Posted March 2, 2011 Since it was paid to the Trust, you do need to file a 1041, I believe. Just to make the IRS computers happy. Quote Link to comment Share on other sites More sharing options...
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