"Mark Bole" <makbo[at]pacbell.net> wrote in message
news:yl1Bj.13653$5K1.5902[at]newssvr12.news.prodigy.net...
- quote -

Trusts are strange beasts, each one is different. They are often written
such that capital gains are considered part of the corpus of the trust and
not as part of the distributible income.

Ira Smilovitz

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Ira Smilovitz wrote:
- quote -

Is it a simple trust if income is retained?

Capital gains, passed through to beneficiaries, could be taxed at
different rates. OP states there is only one beneficiary, and I
understood that all income was previously reported and taxed on that
beneficiary's individual return.

-Mark Bole

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"Stuart Bronstein" <spamtrap[at]lexregia.com> wrote in message
news:Xns9A5A717FBD9CEavocatstuyahoofr[at]130.133.1.4...
- quote -

Simple trusts aren't always simple. For instance, what happens to capital
gains? If they are retained in the trust (common for A-B type trusts), there
could be tax due.

The various penalties are described in the instructions for Form 1041. There
could be penalties for failure to file K-1s timely, even if there is no tax
liability.

Ira Smilovitz

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"Mark Bole" <makbo[at]pacbell.net> wrote in message
news:4KgAj.8934$tW.6754[at]nlpi070.nbdc.sbc.com...
- quote -

There is a $50 penalty per k-1 for late filing or failure to
file.

Drew Edmundson, CPA
Cary, NC

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Mark Bole <makbo[at]pacbell.net> wrote:
- quote -

To me, too. Mostly I wanted to verify that, with no tax due there
would be no penalty. It may have been my fault, so I wanted to be
prepared if there were additional cost to getting it fixed.

- quote -

I'll have them consult their own accountant, or bring in one who knows
about trust returns, and let him decide what the best approach is.

Thanks again.

Stu

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Stuart Bronstein wrote:
[...]
- quote -

Is the trust income relatively straightforward in nature, such as
interest and dividends? If so, and there is only one beneficiary, and
the trust tax ID didn't exist for past years, it seems like it would be
a lot of busywork to file amended individual returns and K-1's and
nominee interest/dividend forms back and forth, when the result will not
change anything.

I have no direct experience with what the IRS wants in this situation,
so can't offer anything more.

-Mark Bole

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Mark Bole <makbo[at]pacbell.net> wrote:
- quote -

Makes sense, thanks.

- quote -

Yes, all tax has been paid. What happened was that when one spouse
died, the assets weren't divided into A and B trusts. What I'm trying
to figure out is what the damage is from failing to do that (in 2005).

Sounds like we can do it retroactively, file the required returns and
otherwise no damage. Is that about the size of it?

Stu

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Stuart Bronstein wrote:
- quote -

According to instructions for form 1041, if trust gross income (taxable
or not) is over $600, there is a requirement to file.

I would expect all the trust net income to be passed through to the
beneficiary via a schedule K-1, resulting in no direct taxation of the
trust. However if the trust is allowed any deductions, these should be
claimed to reduce the taxable amount to the beneficiaries.

The penalty for not filing is a percentage of the tax due, so if no tax
due, then no penalty. But, did the beneficiary actually report and pay
tax (if any) on the distributed taxable income? The trust should have
its own tax ID number, so any 1099-INT, -DIV, -B amounts need to show up
somewhere.

-Mark Bole

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I have a question concerning an irrevocable simple trust. That is to
say that it's an irrevocable, non-grantor trust that, by its terms,
necessarily distributes all its income each year. It is in fact the
"B" (decedent's) trust of an A-B trust. The surviving spouse is the
beneficiary.

Is the trust required to file an informational return, even though any
taxable income is deducted so that it has no tax due?

And if so, if a return was not filed, what is the penalty?

Thanks.

Stu

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >