Filing tax for rentals transferred from trust

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Filing tax for rentals transferred from trust

George Habator
Member since 2022 · 25 posts · 7 votes
Hi, all. Here's a question for the tax pros.

My grandparents left rental property in a trust, of which i had a share. (The property is in CA, if it matters.) In March of '21, the trustee transferred title of the property to all beneficiaries personally as tenants-in-common. The rental tenants continued to pay rent to the trust and the trust account paid all expenses. This went on the entire '21 (without my knowledge). Now, the trustee's CPA said that the trust should file taxes for all fiscal activity for the whole year and he'll give a K-1 to everyone for their share. Then, nothing else should be filed individually on anyone's return for this property.

Is this correct? It seems to me that the trust can only file activity until the title transfer and i must declare everything from title transfer and beyond on my own Schedule E. Please clarify. Thanks
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David M.
Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes
4y

@George Habator

ATM = at the moment

I think the issue he is saying is because you are owning the property as Tenants in Common, basically all of you are on the Deed, and the Trust is still the landlord, because they gave the lease, its pretty messy.  The trust needs to continue to file an estate/trust tax return to spit out the K-1's to you, and then everybody needs to the include the K-1 info AND split up all the expenses (I'm assuming the trust isn't picking up the tab anymore) to go onto all of your personal returns, e.g. the SchE.

That's my take on his short post...

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  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    4y

    This sounds correct. The trust received the money and therefore issues the K-1's based on this received money.

    I'm sure a real CPA will chime in. I just play one on TV.

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  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
    4y
    Originally posted by @George Habator:
    Hi, all. Here's a question for the tax pros.

    My grandparents left rental property in a trust, of which i had a share. (The property is in CA, if it matters.) In March of '21, the trustee transferred title of the property to all beneficiaries personally as tenants-in-common. The rental tenants continued to pay rent to the trust and the trust account paid all expenses. This went on the entire '21 (without my knowledge). Now, the trustee's CPA said that the trust should file taxes for all fiscal activity for the whole year and he'll give a K-1 to everyone for their share. Then, nothing else should be filed individually on anyone's return for this property.

    Is this correct? It seems to me that the trust can only file activity until the title transfer and i must declare everything from title transfer and beyond on my own Schedule E. Please clarify. Thanks

    If trust is going to give you the K-1s, then you should pick up the activity. This is not technically correct, but the most practical approach is ATM. TIC ownership is a hassle and you would have to file a partnership return and trust return, if not done this way.

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  • George Habator
    OP
    Member since 2022 · 25 posts · 7 votes
    4y

    Thanks @Ashish Acharya for the reply. To clarify, what you are saying is that if the trust only gives a K-1, i'm fine with just that. What is ATM?

    Also, going forward, do i just report my percentage of the rentals and expenses on Schedule E or does there need to be a partnership return also?

    Thanks

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  • David M.
    Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes
    4y

    @George Habator

    That's interesting... Don't really know... I would think sooner or later as joint owners you would need to file something.  But, the nothing else to be filed individually is somewhat misleading.  You will have it on your personal returns via the K-1.  The K-1 is spit out by a partnership return -- think of it like a W2 or 1099 for partnerships.  Maybe the trustee created a partnership, either on purpose or by "accident" in placing Title in all of your names.  The potential pain in the *** is you can't properly file your individual returns until you get your k-1.  Partnerships are notorious for spitting out k-1's in March / April.  As such, one always needs to file for an extension or rush to get your own return prepared.

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  • George Habator
    OP
    Member since 2022 · 25 posts · 7 votes
    4y

    Any clarification possible? Thanks

    Originally posted by @Ashish Acharya:

    If trust is going to give you the K-1s, then you should pick up the activity. This is not technically correct, but the most practical approach is ATM. TIC ownership is a hassle and you would have to file a partnership return and trust return, if not done this way.

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  • David M.
    Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes
    4y

    @George Habator

    ATM = at the moment

    I think the issue he is saying is because you are owning the property as Tenants in Common, basically all of you are on the Deed, and the Trust is still the landlord, because they gave the lease, its pretty messy.  The trust needs to continue to file an estate/trust tax return to spit out the K-1's to you, and then everybody needs to the include the K-1 info AND split up all the expenses (I'm assuming the trust isn't picking up the tab anymore) to go onto all of your personal returns, e.g. the SchE.

    That's my take on his short post...

    1Reply
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