Asked over 4 years ago - Bowie, MD
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My mother died in 2008. She placed both her personal residence and vacation home in a living trust. She had no other assets. My sister and I are the beneficiaries of the trust, and I am her personal representative. The vacation home has been a rental property and her residence will also be a rental property.
I will file her final personal tax return. Will the vacation home rental income & deductions end on her date of death? I am confused about whether to file a return in the name of the trust or an estate return? I obtained an ein for the estate, but if I instead need to file for the trust (now and in the future) do I get an EIN in the formal name of the trust (ex; Doe Living Trust)?
You will need to file a final income tax return for your mother for the time period of January 1, 2008 through her date of death. All rental income and expenses for that time period would be reported on your mother's final income tax return (Form 1040).
Beginning with your mother's date of death, the Trust will need to file tax returns (and will need to have a separate EIN). In most cases, the tax year will run from your mother's date of death through the end of 2008. All rental income and expenses for that time period would be reported on the Trust's income tax return (Form 1041). There are some cases in which a different tax year can be elected, but you will need to discuss that with your own C.P.A. or attorney.
You should consult with a C.P.A. about your specific situation. You will need to determine how to allocate income between the two time periods. Also, there are some special situations, such as depreciation, you should discuss with a C.P.A.
I agree that you should first see a tax person. But there is more that can determine what happens tax wise. What happens with the vacation home tax issue can depend upon the provisions of the Trust. Trusts come in thousands of different forms. They are not all the same. You need to read the trust and understand it and if you don't, bite the bullet and see a lawyer.
If all your mother's assets were in the trust, there is no need for the initiation of probate and the appointment of a Personal Representative - the primary purpose for a revocable trust is to avoid probate. No probate - then no need for an EIN for the estate. If the trust provides for a continuation of the trust or a new trust there will be a need for an EIN for that entitiy - as you can see this circles back to what the trust provides.
You should be consulting with a local CPA or tax return preparer who has experience with estate tax returns. If you don't do it correctly it will cause complications in the immediate future.
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