Legal Question in Wills and Trusts in California
If a revocable trust is a disregarded entity for income tax purposes, does that mean that an ownership interest in an LLC would still have a K-1 prepared to the individual and thus included on the personal tax return as opposed to it being issued to the revocable trust and included on the form 1041 Trust return?
1 Answer from Attorneys
Here is the answer from the IRS's website:
Q: Do trusts have a requirement to file federal income tax returns?
A: Trusts must file a Form 1041, U.S. Income Tax Return for Estates and Trusts, for each taxable year where the trust has $600 in income or the trust has a non-resident alien as a beneficiary. However, if the trust is classified as a grantor trust, it is not required to file a Form 1041, provided that the individual grantor reports all items of income and allowable expenses on his own Form 1040, U.S. Individual Income Tax Return. Thus, the grantor/individual would pay the total tax liability upon the filing of his return for that taxable year.
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