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Trust tax question

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davew128

Senior Member
You said, "Which has nothing to do with fiduciary taxation or any OTHER form of income taxation. Anything else?"

You have no idea if the assets involved are connected with " fiduciary taxation". It certainly wasn't clear from the OP's comment.
You mean other than the title of the thread? Do you even KNOW what a fiduciary tax return is?

Those business assets could be the product of different transactions with a taxable obligation. The OP did not suggest this was only a "fiduciary taxation" situation.
Because I'm already in a bad mood, you're going to be schooled here Junior.

You said, "The OP asked about fiduciary taxation".

No the OP did not. That was an assumption on your part.
No, it was a fact. You don't know what fiduciary taxation even is and don't have the testicular fortitude to admit it.
 


LdiJ

Senior Member
You said, "Which has nothing to do with fiduciary taxation or any OTHER form of income taxation. Anything else?"

You have no idea if the assets involved are connected with " fiduciary taxation". It certainly wasn't clear from the OP's comment. Those business assets could be the product of different transactions with a taxable obligation. The OP did not suggest this was only a "fiduciary taxation" situation.

You said, "The OP asked about fiduciary taxation".

No the OP did not. That was an assumption on your part.
This post right here simply underscores that you have no idea what you are talking about. The only thing that this could ever be is a fiduciary tax situation. Everything involved here involves a fiduciary tax situation. Goodness gracious at least google a term and make sure that you know what it means before you vehemently argue with tax professionals...or any other professional for that matter.

Now, once again, I am going to advise the OP NOT to distribute any assets until all of the necessary tax returns are filed and the taxes paid...or to at least distribute only a small portion. Estate attorneys are not tax experts and you cannot rely on the word of an estate attorney that even money in a personal bank account can be safely distributed until all tax returns are filed and taxes paid.

I am dealing with an executor of an estate right now who distributed 400k from a personal account not realizing that the source of the money was the deceased deciding to liquidate all of her retirement accounts a month before she died. She owes over 100k in tax on that money and now he is having to sue the heirs to get the money back to pay the taxes.
 

curb1

Senior Member
Are you two having fun yet? You are discussing something that had little to do with the OP's question. You both are completely guessing about the "business assets/checking account".
 

LdiJ

Senior Member
Are you two having fun yet? You are discussing something that had little to do with the OP's question. You both are completely guessing about the "business assets/checking account".
Well...OK..now things have gone into bizzaroland weirdness.

OP, I am going to sincerely apologize to you because for some really odd reason, someone who clearly knows nothing about the subject you asked about has now taken your thread into neverneverland.

At this point, since you cannot possibly know why...and quite frankly neither do I...I am going to tell you to get a consult with a local tax professional ASAP. Unfortunately due to the bizarre nature that this thread has taken, its not safe for you to rely on any advice given here.
 

davew128

Senior Member
Are you two having fun yet? You are discussing something that had little to do with the OP's question.
Actually we WERE. Just because it went over your head doesn't negate that. Let me make this so simple even a CAVEMAN can understand it: IT DOESN'T MATTER WHICH ACCOUNT THE MONEY COMES FROM. Estate owns business. Business has income. Estate is responsible for the tax on that income UNLESS it distributes assets to the beneficiaries, WHICH IT DID. This is fiduciary taxation 101. Now go back into your mother's basement.
 

curb1

Senior Member
So you agree with my first response to the OP .... "Basically, there generally would be taxes on any income that was made after your mother died."
 

TrustUser

Senior Member
there has been so much arguing back and forth, that i am not sure anyone is aware of the original post, so i am gonna repost it

"Trust was created in CA. Some beneficiaries are in CA, some in NC.

I am the trustee for my mothers estate and she passed last year. She had two checking accounts, one personal and one for her small business. The personal account had cash she had put away from selling her home several years ago. My accountant said that I could go ahead and do a partial distribution of the personal account to the beneficiaries (her grandchildren) and that there would be no taxes owed. She did say there would be taxes owed on the business account and the proceeds from the sale of the business. I just want to confirm that is correct. "

here are some thoughts

1) the words "trustee for my mothers estate" are of course incorrect. and when issued, there can be confusion as to whether there is a trust or not. but the op refers to a trust, so at least we know there is one. it is not at all clear to me what (estate or trust) owns any of the 3 assets (personal bank account, business bank account, business) that were mentioned.

2) taxes on the proceeds of the sale of the business - i interpret this to most likely mean that the benes have decided to sell the business. and the taxes will be based upon the gain (sale price less basis). i have never inherited a business, so i dont know for sure what sort of stepped up value it receives, but the death occurred a year or so ago, so that business today could have a different value than when mother passed.

3) i suspect that accountant knows that at least some of the money can be distributed now without any effect, and is allowing a partial distribution. to be safe, i would ask the accountant how much could be safely distributed. as ldij mentioned, you want to make sure you have plenty left to pay whatever is necessary, without having to get it back from benes.
 

davew128

Senior Member
3) i suspect that accountant knows that at least some of the money can be distributed now without any effect, and is allowing a partial distribution. to be safe, i would ask the accountant how much could be safely distributed. as ldij mentioned, you want to make sure you have plenty left to pay whatever is necessary, without having to get it back from benes.
You're missing the point. Any tax is going to have to be paid by the beneficiaries ANYWAY. Any income from GAIN on the sale of the business or its assets would ordinarily be paid by the estate (which is likely minimal given basis adjustment at death). Any OTHER income is going to be taxed by the beneficiaries because income has been distributed out. If everything has been distributed out, even the GAIN gets taxed to the beneficiaries. This is all fundamental stuff and is why the person best suited to answer the question of specifics is the person who would be preparing the tax return.
 

curb1

Senior Member
davew128,

You are trying to read too much into the OP's comment. If the business was titled in the trust and there was income (over $600.) for the "business" then the tax would need to be paid by the trust on Form 1041 and not by the beneficiaries. There is no indication that the trust has been closed.

You said, "Any tax is going to have to be paid by the beneficiaries ANYWAY." Not true.

and

"Any income from GAIN on the sale of the business or its assets would ordinarily be paid by the estate (which is likely minimal given basis adjustment at death)." Not true again if this business was titled within the trust.

and

"Any OTHER income is going to be taxed by the beneficiaries because income has been distributed out." Where did the OP say that the business income has been distributed? The "accountant" said that the business account should NOT be distributed.

You are correct that this is "fundamental stuff".
 

davew128

Senior Member
davew128,

You are trying to read too much into the OP's comment. If the business was titled in the trust and there was income (over $600.) for the "business" then the tax would need to be paid by the trust on Form 1041 and not by the beneficiaries. There is no indication that the trust has been closed.
No, I read it just fine. Non-pecuniary distributions have been made. The income follows the distribution. The titling of the business is WHOLLY irrelevant. Unless the business is a C corporation, the income ultimately goes to page 1 of Form 1041. Where it goes from there is determined by the amount of beneficiary distributions.

You said, "Any tax is going to have to be paid by the beneficiaries ANYWAY." Not true.
YES, true. Income has been distributed. See the first post.

"Any income from GAIN on the sale of the business or its assets would ordinarily be paid by the estate (which is likely minimal given basis adjustment at death)." Not true again if this business was titled within the trust.
No, true. Gain is not income for purposes of DNI unless the estate is closing. Tax on gains is paid by the fiduciary unless an election is made or its a final year.

"Any OTHER income is going to be taxed by the beneficiaries because income has been distributed out." Where did the OP say that the business income has been distributed? The "accountant" said that the business account should NOT be distributed.
Tax law does not distinguish between business and non-business income determining the distribution of DNI from a fiduciary to its beneficiaries nor does the source of funds matter. There may be a BUSINESS reason to not distribute funds from the business account, there is no tax reason.

You are correct that this is "fundamental stuff".
And you botched it like a rank amateur.
 

curb1

Senior Member
You don't know that anything has been distributed (apparently nothing has been distributed according to the OP) . You don't know if the trust is terminated. You don't know if the assets are still in the trust, or not. You are guessing.
 

davew128

Senior Member
You don't know that anything has been distributed (apparently nothing has been distributed according to the OP) . You don't know if the trust is terminated. You don't know if the assets are still in the trust, or not. You are guessing.
Interestingly enough, my answers have indicated what happens either way, a fact I know is lost on you.
 

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