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Posted by / 22-Oct-2019 22:44

Tax reporting liquidating trust

Make sure to seek the advice of an estate and trust income tax specialist to determine when and how to take advantage of these opportunities.Many families set up trusts to provide for family members in need of financial assistance or to further their own estate planning goals.Generally, when an estate or trust distributes an asset in-kind to a beneficiary (as opposed to liquidating the asset and distributing cash), there is no gain or loss to the estate or trust, and the beneficiary takes a carryover basis in the asset.However, the estate or trust may elect to recognize the gain, in which case the beneficiary takes a basis in the asset equal to its fair market value on the date of distribution.

Whether you are a fiduciary or beneficiary of an estate or trust, or one of their advisors, you should take note of some of the more important changes under the new income tax laws, as well as strategies that can be employed to minimize the tax.The most common is when the person creating the trust -- also known as the grantor -- retains the right to take assets back out of the trust.That makes most revocable trusts qualify as grantor trusts.Moreover, an election may be made to treat a decedent’s qualified revocable trust as part of the estate, thereby permitting the trust to be taxed on a fiscal year basis as well.A fiscal year is adopted when filing the estate’s first federal income tax return, Form 1041.

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For individuals, the top rate kicks in at taxable income of $400,000 (or $450,000 if married filing jointly); however, for estates and trusts in 2013, the top rate kicks in at taxable income of only $11,950.