Tax Law (Questions About Taxes)/Family Trust - Taxes

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Question
Overview - A family member set up a trust in his will to leave his home to all his family members to use
when they wanted to for vacations (no more that 4 weeks per year). Money was left to be invested and support the home. After many years (20) the trust money to maintain the home ran out and the family is now selling the home. The residence trust has an EIN (Employer Identification Number). When the home is sold the proceeds from the sale will be distributed to the 12 family beneficiaries. Does that money need to be reported as income for the beneficiaries?
We have been told that a return for the EIN will need to filed to the IRS, but should the EIN return report the proceeds as income?
Thank you.

Answer
John,

Thanks for your question.

The trust will need to file a Form 1041, with a K-1 given to each beneficiary. It will show the gain/loss on the sale, along with certain details of the sale. The gain or loss is the difference in the basis and the sale price minus costs of sale. Your basis is the fair market value as of date of death of family member who bequeathed it. Each beneficiary will report the gain or loss from the sale on their respective 1040's.  The trust should not pay the tax, but pass that on to the beneficiaries.

Hope this helps.

John Stancil, CPA

Tax Law (Questions About Taxes)

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John Stancil, CPA

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I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at www.mybaldcpa.com. I also offer seminars and consultations to churches and clergy on their tax issues at www.churchtaxsolutions.com Also visit my blog, www.thetaxdocspot.com. I am listed on Tax Connections at https://www.taxconnections.com/profile/John-Stancil/12258973 Prepare and file your own taxes at www.1040stancilcpa.com

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I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

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FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

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The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

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DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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